Market Commentary: August 27, 2026

Timothy A. Hoyle, Chief Investment Officer
thoyle@haverfordquality.com

Halie W. O’Shea, Vice President, Director of Research
hoshea@haverfordquality.com

U.S. Retailers Still Sold on the Consumer

Last week’s earnings results from several major retailers gave an important fresh look into how U.S. consumers may be feeling—and spending. Recently, sentiment has been a fickle gauge, with consumers reporting sinking confidence even as they continue to spend, travel, and enjoy leisure activities. The major retailers generally confirmed the view of steady consumer spending, reporting solid results. However, as expected, there were some signs of consumers becoming more cautious.

Two factors working in tandem to influence consumer psychology are high interest rates and rising energy prices, while above-target inflation has had a related impact. Last week, retailers echoed these concerns. Walmart reported a 2.6% increase in U.S. same-store sales, which fell short of analyst estimates and represented the retailer's slowest growth rate in more than six years. Walmart Executive Vice President and Chief Financial Officer John David Rainey emphasized that the company was raising guidance "in the face of more than $2 billion of incremental cost tied to higher fuel prices in arguably a softer consumer environment," adding that "it's prudent to remain cautious by only raising the guide modestly." He referenced "seeing some incremental pressure on the consumer relative to the beginning of the year with higher fuel prices. As you go through month-by-month in the last quarter, you can tell when fuel prices increase and got above $4, and perhaps there's a psychological impact to that, that there are choices that consumers are making." 

Caution was also a recurring theme on Lowe's earnings call. Lowe's Chairman, President, and Chief Executive Officer Marvin Ellison stated that "customers continue to tell us that they're being cautious about their spending and prioritizing where and when they invest in their homes." He added, "And it's not just about fuel prices. Fuel prices make up roughly 2% of their annual spend, but it's a combination of fuel prices, geopolitical events, and other uncertain things in the macro." According to Lowe's Executive Vice President Joseph McFarland, "This is leading to consistently smaller projects focused on repair and maintenance needs rather than larger remodeling jobs." Home Depot reiterated a similar sentiment with Executive Vice President and Chief Financial Officer Richard McPhail stating that "consumer uncertainty and housing affordability continue to pressure demand for larger home improvement projects." 

Overall, these results do not indicate to us that the consumer is falling apart. Employment continues to be healthy while jobless claims remain low. With household income and spending power still intact, overall recession indicators are not signaling a contraction. However, we will be closely watching credit card transaction data and delinquency rates for signs that shoppers may be pulling back or lower-income consumers may be struggling disproportionately. 

The earnings calls highlighted how closely tied consumer spending has been to rising oil prices. A resolution to the Iran conflict would go a long way in alleviating the upward pressure on oil prices, which has been a major component of inflation. Despite these pressures, our current view resembles that of Lowe's Marvin Ellison, who emphasized "we don't think the consumer is getting worse. We think it's pretty much the same, but we think it's a healthy consumer that's overly cautious based on all those factors."