Getting real in retail
Despite persistent concerns that sticky inflation would erode purchasing power and drag consumer spending lower, the May retail sales data tells a different story. Spending is up not just in dollar terms, but in quantity, highlighting continued consumer resilience.
3 mins Reading time
Published on 22 June 2026
Nominal retail sales rose 6.9% year-over-year in May, the strongest growth rate in several years and more than double the average pace recorded since 2023. Importantly, this was not simply a reflection of higher prices. Real, inflation-adjusted retail sales grew 2.6% year-over-year — roughly 2% above the average — confirming that consumers are buying more, not just paying more.
However, U.S. consumer spending has not been uniform. The K-shaped dynamic (where higher-income households continue to spend while lower-income consumers face more meaningful pressure) is real and ongoing. While pockets of stress exist, total spending has held up and increased.
That said, the picture is not without risk. Higher inflation could weaken the spending momentum and lead to slower economic growth. For now, the increase in total consumer buying activity supports our constructive forward outlook and justifies remaining invested.
956241 Exp : 22 June 2027
YOU MIGHT ALSO LIKE
Higher inflation has been a dominant theme of the current decade. In addition to price shocks, it is being shaped by secular investment trends in infrastructure, defense spending, onshoring and the ongoing AI buildout. These structural changes reinforce the case for looking beyond traditional 60/40 portfolios to include real assets as a source of diversification and return potential in portfolios.
Inflation appears to have transitioned from its pre-Covid average of 2% to a stickier point closer to 3%, and we do not expect a near-term return to prior levels. In this environment, we believe real assets, such as commodities, infrastructure and REITs, can provide inflation protection, diversification and return potential.
As the S&P 500 approaches all-time highs, there are renewed concerns among investors about elevated valuations. However, historically strong profitability and expected earnings growth appear to support current pricing. In addition, the current S&P 500 price-to-earnings (P/E) ratio is roughly equal to the average since Covid. As a result, we do not view U.S. equities as being in bubble territory and we remain constructive on the asset class.
Stocks, as measured by the S&P 500, are up over 13% through early August. The solid gains have been fueled by a resilient economy, steady consumer spending, optimism around artificial intelligence and better-than-expected earnings growth. Still, some investors worry the advance may be too concentrated in technology and that AI-capex monetization may fall short of expectations. A closer look suggests that it is not just tech moving the market higher.
