Consumer discretionary stocks have emerged as standout performers in the wake of the US midterm elections, driven by cooling inflation expectations, falling Treasury yields, and growing optimism that the Federal Reserve may ease its restrictive monetary policy sooner than previously anticipated.
As investors rotate away from energy and other defensive sectors, strategist Todd Gordon sees a brighter consumer spending outlook creating opportunities in select discretionary names. His top picks include homebuilder Lennar, consumer-products company SharkNinja, and e-commerce giant Amazon.
Lennar: A Housing Play on Lower Rates
Lennar has navigated a challenging housing market marked by high mortgage rates and affordability issues. However, if borrowing costs continue to decline, the company could be a major beneficiary. In its fiscal Q3, Lennar reported adjusted earnings of $1.23 per share and gross margins on home sales of 15.8%, reflecting ongoing pricing and incentive pressures. Revenue reached $8.0 billion, with a manageable homebuilding debt-to-capital ratio of 16.6%.
Despite weaker profitability, Gordon sees long-term potential because housing demand remains structurally strong. Lennar has maintained production through the downturn rather than slashing output, positioning it to capture demand when financing conditions improve. The thesis is straightforward: if inflation cools and mortgage rates fall, sidelined buyers could return, boosting order volumes and pricing power.
SharkNinja: Innovation and Consumer Strength
SharkNinja has become a growth story in consumer discretionary, blending product innovation with strong execution. The company reported Q3 net sales of approximately $1.98 billion, up 21.2% year over year, while adjusted EBITDA surged about 46% to a margin of 23.3%. Management raised its full-year 2026 outlook, citing strength in domestic and international markets. Cooking and beverage revenue jumped 36.6%, while beauty and home-environment sales climbed 45.8%.
Gordon's bullish stance rests on the idea that discretionary spending could accelerate if consumers get relief from lower energy costs and moderating inflation. When households spend less at the pump, they often have more flexibility for purchases like kitchen appliances and beauty products—areas where SharkNinja has strong brands. Unlike retailers that rely on discounting, SharkNinja's growth is driven by new product launches and category expansion, making it an appealing way to play a consumer resurgence.
Amazon: A Pullback Creates Opportunity
Amazon remains a major consumer discretionary holding, but concerns over massive AI and infrastructure spending have weighed on the stock. This comes despite a strong Q3 report: revenue of $201.9 billion, up 12% year over year, and operating income surging 61% to a record $28.1 billion. AWS revenue accelerated 39% to $46 billion, its fastest growth in nearly five years, with a cloud backlog of roughly $578 billion.
The market's hesitation stems from Amazon's enormous capital spending plans, with about $220 billion expected in 2026, largely for AI infrastructure and data centers. For Gordon, this pullback looks like an opportunity. Investors buying Amazon today gain exposure to a dominant online retail platform, a rapidly expanding cloud business, and a highly profitable advertising segment. If the post-election environment supports consumer confidence while AI demand remains robust, Amazon could benefit from multiple growth drivers.
As market leadership broadens and investors seek sectors poised to benefit from easing inflation, these three consumer-focused companies stand out as compelling ways to play a potential comeback in US discretionary spending.
This article is for informational purposes only and does not constitute financial advice.
