Does Consumer Stocks’ Slump Mean We’re in a Bear Market?

Last week, the Nasdaq experienced its worst weekly performance since April, sparking concerns about high valuations, an AI bubble, and market concentrations. The S&P 500, which has been led higher by tech and communication services sectors since the end of the last bear market in October 2022, also saw significant losses in last week’s sell-off.

While tech and communication services have been the top-performing sectors in recent years, consumer stocks are now causing worry among investors. Investing personality Jim Cramer noted that anything consumer-oriented seems to have entered bear market territory.

In 2023 and 2024, tech and communication services were the best-performing sectors in the S&P 500, with average annual gains of 47.6%. In 2025, these sectors continue to outperform the broader market, with year-to-date gains of 22.3% and 24.5%, respectively. Analysts believe that the bull market could continue into 2026 before facing significant corrections.

Despite the strong performance of stocks leveraged to AI, consumer stocks are facing challenges. Consumer staples and consumer discretionary stocks historically have an inverse relationship, with the former performing well during economic downturns and the latter performing well during periods of economic growth. Consumer staples have just broken even with a 1.28% gain, while consumer discretionary is up 4.61%, largely due to the strong performances of Amazon and Tesla.

Amazon and Tesla, both under the consumer discretionary umbrella, have seen significant gains since their year-to-date lows, with Amazon up 42% and Tesla up 81% since April. However, these two stocks make up around 45% of the sector’s weighting, skewing performance results for the other 48 consumer discretionary stocks.

Overall, while tech and communication services have overshadowed underperforming sectors in recent years, consumer stocks are now in retreat, raising concerns among investors about market dynamics and sector rotations. Consumer stocks, particularly in the discretionary space, are considered a key indicator of economic health due to their sensitivity to consumer spending habits. However, removing Amazon and Tesla from the equation reveals some alarming losses across the sector, particularly in price-sensitive industries.

Durable goods companies, such as Whirlpool and La-Z-Boy, have been significantly impacted by the aggressive tariffs imposed by the current administration. Whirlpool has seen a 50% decrease from its year-to-date high, while La-Z-Boy is down 36% since earlier this year. The tariffs have taken a toll on the prices of appliances and furniture, affecting the stocks of these companies.

The apparel industry has also been struggling with tariffs, with companies like Nike, Adidas, and Abercrombie & Fitch experiencing significant declines in their stock prices. Nike and Adidas are down 20% and 30%, respectively, from their 2025 highs, while Abercrombie & Fitch has seen a 56% decrease.

Leisure stocks have also taken a hit, with companies like Royal Caribbean, Wyndham Hotels & Resorts, and Six Flags experiencing substantial declines from their year-to-date highs. The decrease in international travel to the U.S. has contributed to these losses.

Retail companies have not been spared either, with Petco, Peloton, Floor & Decor, and Deckers Outdoor all seeing significant drops in their stock prices. Fast-casual restaurants like Shake Shack and Chipotle have also felt the impact, with decreases of 36% and 47%, respectively.

In light of these losses, diversification is crucial for investors. By spreading their investments across different sectors, investors can mitigate the impact of losses in specific industries. It is important for consumer stocks to participate in or lead bull markets, but maintaining a diversified portfolio with a cyclical, pro-growth tilt is essential for long-term success.

Overall, the consumer discretionary sector is facing challenges, but with strategic portfolio management and a focus on diversified investments, investors can navigate these turbulent times and position themselves for future growth.