Bank of America (BofA) says one sector of the stock market could greatly outperform the rest if the Federal Reserve continues to cut interest rates.
In a new outlook meeting for 2026, BofA Head of U.S. Securities and Quantitative Research Savita Subramanian says consumer staples companies, or lower-priced retailers, will benefit greatly if the Federal Reserve continues to ease monetary policy.
“From a sector perspective, if the Fed is cutting and potentially stimulating consumption, I think that could actually offset some of the pain that that low-income consumer has been feeling.
So what we’ve found over periods of Federal Reserve cutting cycles is that consumer staples companies, lower-priced retailers, tend to outperform the market quite aggressively.
And that would be a big change from recent years, where consumer staples and food stocks suffered the most from inflation. “The low-income consumer was feeling the most acute impact of inflation on rent, utilities, insurance, food, etc.”
Subramanian notes that the upcoming midterm elections may tilt policies toward a more populist rather than trade-focused mindset.
“I also think that as we approach next year’s midterm elections, we could see friendlier populist politics instead of this year’s potentially inflationary and more trade-focused politics.
So those could be really positive drivers for a comeback in that broader consumer story.”
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