US "lost camp" consumer stocks face a "major test" with earnings reports, and the "great pressure" on American families is the root of the problem.

In 2025, the stock market set multiple records, but consumer goods stocks lagged far behind and did not participate in the boom. This week, several large consumer companies will release financial reports one after another, and investors are preparing to face more shocks. Clothing manufacturers, restaurant operators, and shoe retailers performed poorly, with Lululemon Athletica (LULU.US), Mexican fast food chain Chipotle (CMG.US), and Deckers Outdoor (DECK.US) all falling by over 45% this year. Staples such as food groceries, alcohol, and toilet paper retailers are also lagging behind, with Brown-Forman Corporation Class A-A (BF.A.US), Hormel Foods Corporation (HRL.US), and Target Corporation (TGT.US) falling by at least 27%. If Amazon.com, Inc. (AMZN.US) and Tesla, Inc. (TSLA.US) are excluded from tracking non-essential consumer companies in the S&P 500 sub-index, the index's performance in 2025 remains relatively flat. According to S&P Global, Inc.'s classification system, these two tech giants are classified as consumer companies, but most market observers believe that their recent stock price movements are mainly driven by the outlook for artificial intelligence (AI). The downturn in consumer stocks highlights the pressures on American households. A large number of consumer companies have poor stock performance, highlighting the multiple challenges faced by American households. In recent months, continuous layoffs by companies have led to a soft labor market; the tariff policies implemented by the Donald Trump administration have kept prices high for food, clothing, and electronics; and high mortgage interest rates have also put pressure on the real estate market. This week, companies such as McDonald's Corporation (MCD.US), food delivery platform DoorDash (DASH.US), and Wynn Resorts, Limited (WYNN.US) will be releasing financial reports one after another, giving investors the opportunity to understand the latest dynamics in the consumer sector. Walmart Inc. (WMT.US), one of the leading companies in this sector, will not release its financial report until about two weeks later - November 20. Before the market opened on Wednesday, McDonald's Corporation announced its third-quarter financial report, with revenue and adjusted earnings per share falling below market expectations but with global same-store sales growth exceeding expectations. Data shows that in Q3 2025, revenue was $7.08 billion, slightly below the market expectation of $7.095 billion, and higher than the $6.87 billion from the same period last year; global same-store sales increased by 3.6%, exceeding the market estimate of 3.55%; net profit was $2.28 billion, with earnings per share of $3.18. The AI frenzy has overshadowed the difficulties of consumer stocks, and the market is showing a "barbell" differentiation. As of now, the hot AI trading frenzy has been enough to overshadow the increasing difficulties of consumer stocks. The S&P 500 index is currently nearing historic highs, with a year-to-date increase of 15%. Michael O'Rourke, Chief Market Strategist at JonesTrading Institutional Services LLC, stated, "If the current AI investment frenzy didn't exist, and if the job market slowed down this year and consumer pressures appeared, the concern in the investment community would be much stronger." He pointed out that this market differentiation confirms the "barbell" structure of the stock market: on one end, a few AI-related companies and stocks are performing strongly, while on the other end, worries about the labor market and household spending pressures are weighing down most stocks. Since 2025, the S&P 500 technology sector has risen by 27%. Savita Subramanian, Quantitative Strategist at Bank of America Corp, stated that the financial performance of Amazon.com, Inc. and Tesla, Inc. has also hidden the profit contraction of other companies in the non-essential consumer goods sector in the third quarter. Profit for essential consumer goods companies this quarter is expected to decline by 1%. In a research report on Monday, she warned that a weak labor market could mean "future consumption growth will be impacted," and that as the market focuses on the significant increase in capital spending related to AI, cracks have begun to appear in consumer trends. Data provided by Rob Anderson, U.S. Sector Strategist at Ned Davis Research, further confirms the weakness of consumer stocks: in the past six months, only 5% of stocks in the S&P 500 consumer staples sector have outperformed the market, one of the lowest proportions in the past 50 years. Under the government shutdown, layoffs have become a focus of attention, and there is a division in the market regarding the concept of "jobless prosperity." Affected by the U.S. government shutdown, strategists and investors are no longer relying on official labor market data but are paying more attention to company layoff announcements. On October 28, the United Parcel Service (UPS.US) announced it would lay off 34,000 people, shocking Wall Street. On the same day, Amazon.com, Inc. announced plans to cut 14,000 corporate jobs. A few days ago, Target Corporation also announced an 8% reduction in corporate positions, about 1,800 jobs. Dennis DeBusschere, President and Chief Market Strategist at 22V Research LLC, stated, "More layoffs or announcements of layoffs will be a major concern." However, he added, "Fortunately, most companies currently report good employee morale." However, some on Wall Street believe that the layoffs in this round of financial reporting season are beneficial to the stock market. Global Macro Strategy Strategists Adam Pickett and Dirk Willer of Citigroup referred to this phenomenon as "jobless prosperity." They believe that additional layoffs, including those caused by AI development, will prompt the Federal Reserve to adopt a more accommodative policy. In a report on Monday, the two strategists wrote, "This could drive further gains in the stock market, leading to more capital spending related to AI, triggering more layoffs, and ultimately prompting the Fed to be even more accommodative - a cycle that repeats itself." "Considering the uncertainty of the U.S. economic cycle, this trend may still be in its early stages, but we believe the stock market may already be focusing on the risk of 'economic overheating' next year, so we maintain a bullish position."