Strategists on Wall Street are increasingly looking beyond the artificial intelligence trade for fresh drivers of the US equity rally, as concerns grow that enthusiasm for AI-linked stocks may be cooling.
Attention is now shifting toward companies tied to middle-income consumer spending, which some investors see as better positioned to benefit from a broadening economic expansion in 2026.
A team at Goldman Sachs Group, led by strategist Ben Snider, has identified a range of stocks that could gain as household finances improve and spending accelerates.
Their focus is not on essential goods alone, but increasingly on discretionary products and services that consumers buy when confidence rises.
Goldman targets middle-income consumer spending
In a note to investors dated January 6, Snider and his colleagues argued that stocks exposed to middle-income consumers are “particularly attractive” at this stage of the cycle.
The team expects real income growth for this group to accelerate, which will support higher sales growth for companies with steady demand and relatively thin margins.
Goldman’s preferred sectors include healthcare providers, materials producers, and makers of everyday consumer goods.
However, the strongest conviction lies with businesses selling “nice-to-have” products rather than necessities.
This includes retailers of upscale apparel and accessories, household goods manufacturers, tour operators, and casinos.
The call reflects Goldman’s broader expectation that value stocks will continue to outperform into early 2026.
According to the firm, easing pressure from tariffs introduced under President Donald Trump, a stabilising labour market, and tax rebates linked to last year’s major legislation should all help underpin consumer spending.
Retail stocks gain as investors rotate away from AI
The shift in sentiment comes as investors look for alternatives to the AI trade that has dominated markets for the past three years, largely driven by the so-called “Magnificent Seven” technology companies.
With valuations stretched in parts of the tech sector, some investors are increasingly exploring areas that have lagged in recent years.
The S&P Retail Select Industry Index, which includes companies such as CarMax, Etsy, and Academy Sports & Outdoors, is already showing signs of renewed interest.
The index is up 3.5% since the start of the year and has gained 8.8% since early November, coinciding with the peak holiday shopping season.
Economists surveyed by Bloomberg expect the US economy to grow by 2.1% this year, with consumer spending providing a key boost.
This outlook has supported a gradual rotation into more traditional value-oriented sectors.
“There is a repricing of economic growth higher,” said Charlie McElligott, cross-asset macro strategist at Nomura Securities International.
He added that such a shift tends to favour value stocks over higher-priced growth names.
Dick’s Sporting Goods highlights early winners
One early beneficiary of the rotation has been Dick’s Sporting Goods.
Shares in the US retailer have risen 6.1% in the first four trading days of 2026, recovering some of the ground lost in 2025, when the stock fell 13%.
Options activity suggests some investors are betting on further gains.
Susquehanna International Group, in a Bloomberg report, said a recent trade could generate up to $3.5 million if the stock moves back toward its early-2025 high of $250 a share.
Dick’s is among several retailers highlighted by Goldman as having strong exposure to rising middle-class wealth, alongside Burlington Stores, Best Buy, Five Below, Levi Strauss, and Gap.
While traditional retailers continue to face competition from e-commerce giants, the search for value amid lofty tech valuations appears to be drawing investor interest elsewhere.
For now, as the AI rally shows signs of fatigue, Wall Street’s attention is increasingly turning to the US consumer.
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