While equity markets, particularly in the US, are posting solid gains, the rally remains highly concentrated, leaving certain market segments struggling to keep pace.
Indeed, the upward trend has been fueled by the tech sector (specifically semiconductors) for several months now, which is reaping the rewards of hundreds of billions of dollars in AI investment. Meanwhile, consumer discretionary spending is facing significant headwinds.
According to Bank of America, the sector has even reached historical lows relative to the S&P 500.
In Europe, consumer-related themes are also the primary laggards. The automotive sector has stalled, down 12% YTD. However, the luxury goods industry is arguably suffering the most. LVMH (-27%) and Hermès (-24%) feature amongst the worst performers in the EuroStoxx 50 for 2026.
Luxury has been grappling with a slowdown for several years, while the automotive sector is digesting new tariffs, a stalled pivot toward electric vehicles, and intensifying Chinese competition. Beyond these sector-specific hurdles, the underperformance of consumption reflects an economic cycle that is driven more by capex than household spending.
This year, the four "hyperscalers" are expected to spend $725bn to develop their AI infrastructure. Some companies have not hesitated to cut jobs to fund these investment plans, a trend that hardly supports consumer demand.
In recent quarters, AI-related Capex has been the primary engine of American growth, a reality clearly mirrored in stockmarket performances.
Nevertheless, the investor exodus from consumer discretionary may be creating opportunities, as valuations have eased significantly.
