4 Sector ETFs to Play for 2026

Core Insights - U.S. consumers are showing signs of financial strain, particularly lower-income households reducing discretionary spending, as indicated by recent earnings reports from major consumer-facing companies like McDonald's [1][2] Consumer Behavior - Lower-income households are cutting back on discretionary spending, with quick-service restaurant traffic from this group falling by nearly double digits in Q3, a trend persisting for two consecutive years [2] Economic Outlook - The economy is facing challenges from high costs and eroding savings, likely due to high interest rates and increased tariffs, but sectors with durable earnings power and exposure to wealthier consumers or emerging growth concepts like AI and infrastructure may benefit [3] Sector Performance - For 389 S&P 500 members that reported Q3 results, total earnings increased by 14.6% year-over-year, with revenues up by 8.3%. Notably, 83.5% of these companies exceeded EPS estimates, and 75.6% surpassed revenue estimates [5] - Q3 earnings are expected to show growth for 11 of the 16 Zacks sectors, with significant growth in Aerospace (+76.5%), Technology (+24.7%), Finance (+24.4%), and Retail (+15.3%) [6] Sector-Specific Insights - Aerospace: The sector has achieved 76.5% earnings growth on 14.6% higher revenues, with projected earnings growth of 65.1%, 4.3%, and 13.3% for Q4 2025, Q1 2026, and Q2 2026, respectively [7] - Technology: This sector has recorded 24.7% earnings growth with 14.4% higher revenues, with expected growth of 10.9%, 12.4%, and 17.8% in the upcoming quarters [8] - Financials: The Financials sector reported 24.4% earnings growth on 8.5% higher revenues, with anticipated growth of 15.8%, 15.7%, and 8.6% in the next three quarters [9] - Retail: The Retail sector has seen 15.3% earnings growth with 6.2% higher revenues, with expected growth of 3.6%, 7.8%, and 9.0% in the upcoming quarters [10]