Navigating a Split Consumer Landscape

In terms of our consumer discretionary positioning, we’re currently equal weight the sector. We view the backdrop as very uncertain, given the kind of dividing forces right now between a stronger backdrop for the consumer from things like tax refunds this year, which should benefit the middle- to low-end consumer that’s been in a tougher spot with inflation in the last couple of years. But on the other side, the geopolitical uncertainty of the current conflict in Iran and higher energy prices, leading to a potentially higher inflation and interest rate outlook, has us currently positioned neutral for the space. When we look at opportunities in the group, we’re really looking for idiosyncratic stories that can outperform regardless of the backdrop. We are positioned in names that we feel like have idiosyncratic stories that will play out in a kind of normalized consumer backdrop. When we look at consumer durables, that is an area that we have taken an overweight position based on segments of that economy that are still operating near GFC-level lows of unit production, such as marine and RVs. We think that if in a more accommodative-rate environment that those could see significant re-rating as they’re priced at trough valuations on trough earnings at the moment.

Filmed March 2026

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