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.
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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
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History of stocks after the Fed hikes
History of stocks after the fed hikes
Sticky inflation and resilient growth have revived monetary tightening, increasing the risk of higher-for-longer rates and near-term volatility. We continue to believe economic resilience and strong corporate profits should continue to provide a favorable backdrop for stocks, and would use periods of market weakness to add selectively to equities. Additionally, owning real assets can help hedge against inflation.
