⚡️Market Strategy Flash
August 28, 2026
“Show, don’t tell” is a creative technique where a writer replaces complex, detailed explanations with sensory impressions and actions to let readers experience the story for themselves naturally. From a market strategy perspective, that means using striking visuals to “storyboard” the message because pictures are worth a thousand words. From a consumer perspective, that means people’s actions speak louder than their words. Despite historically low morale amongst households, the good news is that US consumers continue to spend (see the chart below).
How’s that possible?Cautious, doubtful and outright fearful investors should consider the positive “wealth effect” currently supporting consumption. A raging bull market compels asset owners with high-paying jobs to spend and support the top tier of the “K-shaped” economy. In other words, we’re in a positive “feedback loop” whereby asset price inflation is fueling consumption, which is brightening the earnings outlook and pushing stocks even higher.
Positive “Wealth Effect:” Actions Speak Louder Than Words
Sources:FRED, S&P Global, WCG, 08/24/26.Notes:NBER = National Bureau of Economic Research.
True, the recent sequential deceleration in retail sales partly reflects ebbing liquidity from theincome tax refundandAmazon Prime Dayfalling in June, not July. However, positive – albeit meager –real income growth, a potentialwealth tax cutfrom easing energy prices and thecorporate tariff refundshould provide important offsets / supports for consumption.
$166 Billion Catalyst
The Supreme Court’s February 2026 decision to strike down theInternational Emergency Economic Powers Act(IEEPA) tariffs triggered an estimated $166 billion of refunds back to US importers. That capital injection is flowing through corporate income statements and/or balance sheets, creating an additional tailwind for consumer spending power, although there’s a divergence in business strategy regarding how that capital is being deployed.
Corporate Split: Volumes vs. Margins
Fundamentally, retailers are divided on whether to use the tariff windfall to support the consumer or to appease shareholders:
- Price Cutters (Market Share Strategy):Walmartreceived $2.9 billion and explicitly announced it’s deploying the tariff refund to lower prices and cut consumer costs. The company executed 11,000 price rollbacks in the second quarter – particularly in groceries and general merchandise – aiming to drive traffic and capture market share from cash-strapped shoppers.
- Margin Protectors (Profitability Strategy):Conversely, other retailers are using the windfall to pad their bottom lines. For example,Target,Home DepotandLowe’shave deployed the cash to reduce their cost of sales and boost gross margins, not to cut prices. Meanwhile,TJXutilized a portion of its refund for employee incentives and bonuses.
Winners and Losers
IfWalmart’s decision to use the tariff refund to lower prices successfully drives volumes, it could force a competitive response across the industry. Specifically, a broad capitulation – where other retailers pass their refunds down to the shelf level to defend market share – could act as a disinflationary force. Effectively, this scenario would deliver a secondary stimulus supporting retail sales volumes and consumer purchasing power in the second half of the year.
Big Week for Big Retailers: Solid to Healthy Top-Line Results
Sources:Seeking Alpha, WCG, 08/24/26.Notes:T = Trillion. B = Billion.
Let the Results Speak for Themselves
2Q26 company reports paint a clear picture of a bifurcated retail landscape where the consumer remains active but highly strategic.
- Triumph of Value:Target(TGT),Walmart(WMT) andBJ’s Wholesale Club(BJ) were the standout performers.Targetdelivered a staggering 75.64% normalized earnings per share (EPS) beat and 100.49% year-over-year (Y/Y) EPS growth, reflecting refund-assisted margin expansion, operating leverage and management execution.BJ’simpressive 15.73% Y/Y revenue growth highlights a surge in bulk, value-driven purchasing (see the surrounding tables).
- Margin Expansion:Despite varying top-line performance, every company in the surrounding tables beat both normalized and GAAP EPS estimates. In other words, major retailers have optimized their cost structures and supply chains, allowing them to protect and grow their profitability amidst intermittent disruption and lingering uncertainty with the added benefit of the tariff refund.
- Home Improvement Divergence:Lowe’s(LOW) was the lone laggard relative to top-line expectations, as it was the only retailer that missed revenue estimates by -0.56%. Despite missing the mark, however, the company still posted 8.34% Y/Y revenue growth. By contrast,The Home Depot(HD) managed to beat its revenue target by 1.35% with 5.71% Y/Y growth. While housing market weakness is impacting the industry,Home Depot’s heavier exposure to professional contractors is likely helping the company to navigate analyst expectations better thanLowe’sreliance on do-it-yourself (DIY) shoppers.
- Discretionary Deceleration:The TJX Companies(TJX) posted respectable numbers with a slight revenue beat (0.15%) and 10.91% Y/Y normalized EPS growth. While earnings growth decelerated, its healthy low double-digit pace suggests consumers are seeking value and discounted prices over non-essential apparel.
Big Week for Big Retailers: Across the Board Bottom-Line “Beats”
Sources:Seeking Alpha, WCG, 08/24/26.Notes:EPS = Earnings per share. GAAP = Generally Accepted Accounting Principles.
Bottom Line
- Selective Shoppers:Consumers aren’t retrenching – they’re optimizing. Spending remains healthy yet focused on necessities, groceries and clear value propositions, not big discretionary splurges.
- Small-Ticket Items:Lowe’s negative revenue guidance and lower expectations for home improvement confirm that shoppers are avoiding large, easily deferrable purchases, owing to high financing costs and slow housing turnover.
- Purchasing Power:Accelerating earnings growth among the big broadline discounters and value clubs demonstrates that households are actively trading down to stretch their dollars across elevated living costs.
Definitions
NBER Recession: A significant decline in economic activity spread across the economy, lasting more than a few months, as officially designated by theNational Bureau of Economic Research. It is determined by analyzing factors like gross domestic product, income and employment.
S&P 500: A stock market index tracking the performance of 500 of the largest publicly traded companies in the United States. It serves as a primary benchmark for the overall health of the U.S. stock market.
Retail Sales: An economic metric that measures the total consumer spending on durable and non-durable goods over a specific period. It is tracked monthly and serves as a key indicator of consumer confidence and economic health.
Profit Margin: A profitability ratio calculated by dividing net income by total revenue to show what percentage of sales turned into profit. It measures how effectively a company converts its top-line revenue into bottom-line earnings.
Normalized EPS: An adjusted earnings per share metric that strips out one-time gains, non-recurring expenses, and seasonal fluctuations. It helps investors gauge a company’s true, ongoing operational profitability under normal conditions.
GAAP EPS: A standard earnings per share metric calculated strictly according to Generally Accepted Accounting Principles (GAAP). It represents a company’s official, legally mandated profit allocation per outstanding share of common stock.
Correlation Coefficient: A numerical measure that quantifies the strength and direction of a linear relationship between two variables. It ranges from -1 to +1, where values close to the extremes indicate a strong relationship and zero indicates no linear correlation.
Disclosures
The views expressed are for informational and educational purposes only and are subject to change without notice.
This material is not intended as, and should not be interpreted as, individualized investment advice or a recommendation to buy, sell, or hold any security, sector, industry, or investment strategy.
References to specific companies, securities, sectors, or industries are for illustrative purposes only and should not be construed as investment recommendations.
Investing involves risk, including the possible loss of principal. Investments in a specific industry or sector may involve greater risk and volatility than more diversified investments.
Past performance is not indicative of future results. No investment strategy can guarantee a profit or protect against loss.
Forward-looking statements, including views about future demand, pricing, supply, or industry cycles, are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results may differ materially.
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Securities offered through LPL Financial, Member FINRA/SIPC. Investment Advice offered through WCG Wealth Advisors, LLC, an SEC Registered Investment Advisor. WCG Wealth Advisors, LLC and The Wealth Consulting Group are separate entities from LPL Financial. Index performance is shown for illustrative purposes only and does not predict or depict the performance of any investment. Past performance does not guarantee future results.
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The fast price swings in commodities will result in significant volatility in an investor’s holdings. Commodities include increased risks, such as political, economic, and currency instability, and may not be suitable for all investors. (122-LPL)
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Forward-looking statements are not guarantees of future results. They involve risks, uncertainties and assumptions; there can be no assurance that actual results will not differ materially from expectations. In addition, forward-looking statements, including index targets or market scenarios, are hypothetical in nature, reflect current views and assumptions and are subject to change based on market and economic conditions and are not guarantees of future performance. This is a hypothetical example and is not representative of any specific investment. Your results may vary. (88-LPL) Scenario outcomes are illustrative and not predictive. This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.
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Publication Date: August 28, 2026
For Public Use in the US
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