Summary of U.S. Consumer Strategy & Quantitative Research Webinar Industry Overview - The focus is on the U.S. Consumer sector, specifically Consumer Discretionary and Consumer Staples, which have underperformed the market by low double-digit percentages year-to-date in 2025 [3][18]. Core Insights and Arguments - **Market Performance**: 2025 has been challenging for the Consumer sector, with both Discretionary and Staples underperforming. Consumer Staples are now seen as attractive due to favorable price-to-forward earnings valuation multiples [3][31]. - **Sector Dynamics**: There is a contrasting performance between Consumer Staples and technology sectors, raising concerns about a potential tech bubble. Economic factors such as cutbacks in healthcare and SNAP benefits for low-income consumers, alongside inflation, could lead to an economic slowdown [4][19]. - **Investment Recommendations**: Focus on Consumer stocks that are: 1. More international 2. Exposed to higher-income consumers 3. Defensive in nature 4. Not facing idiosyncratic pressures that are not fully priced in [3][22]. - **Key Themes**: Tariff volatility, GLP-1 drug uptake, and consumer bifurcation are critical themes to monitor. Lower-income households are pressured by cutbacks, while higher-income households may benefit from upcoming tax breaks [5][20]. Subsector Recommendations - **Consumer Staples**: Emphasis on companies with international exposure in Soft Beverages and Household & Personal Care, as well as defensive Broadline Retailers. Caution is advised around companies negatively impacted by GLP-1 drug uptake [6][22]. - **Consumer Discretionary**: Focus on higher-quality names with reliable earnings performance. Caution is advised for those without a quality bias, although companies catering to higher-income consumers may benefit from tax breaks in 2026 [6][22]. Performance Metrics - **Consumer Discretionary**: - Best performers include Casinos (23.7%), Apparel Retail (22.7%), and Automotive Retail (19.1%). Weakest sectors include Textiles, Apparel, and Luxury Goods (2.1%) [27][28]. - **Consumer Staples**: - Dollar Stores (49.5%) and Tobacco (29.8%) are leading, while Food Producers (-7.3%) and Alcoholic Beverages (-28.6%) are lagging [29][30]. Valuation Insights - **Valuation Multiples**: Discretionary multiples are about 10% cheaper than historical averages, while Staples are in line with historical averages despite underperformance [31][32]. - **Stock Performance Drivers**: In 2025, multiple expansion has driven stock performance more than earnings growth in both sectors [44]. Earnings Revisions - **Sales Expectations**: Remained stable across consumer discretionary sectors, while earnings per share revisions have shown significant dispersion, particularly declining in textiles and luxury goods due to tariff impacts [51][52]. Conclusion - The current environment is characterized by significant sector rotation and stock-picking opportunities. Analysts recommend focusing on high-quality, defensive stocks with international exposure as the market navigates through economic uncertainties and potential sector shifts [21][22].

Summary of U.S. Consumer Strategy and Quantitative Research Call Industry Overview - The call focuses on the U.S. Consumer sector, specifically Consumer Discretionary and Consumer Staples, which have underperformed the market by low double-digit percentages year-to-date in 2025 [2][15]. Key Insights and Arguments 1. **Valuation Multiples**: Price to forward earnings valuation multiples for Consumer Staples appear attractive relative to the market, suggesting potential investment opportunities [2][15]. 2. **Market Dynamics**: The Consumer Staples and tech sectors are experiencing contrasting trading dynamics, with concerns about an AI bubble and its potential burst [3][16]. 3. **Economic Pressures**: Cutbacks in healthcare and SNAP benefits for low-income consumers, combined with rising inflation, may lead to an economic slowdown, while tax breaks for wealthier consumers in 2026 could sustain market strength [3][16]. 4. **Flight to Safety**: In the event of economic downturns, the Consumer Staples sector is expected to benefit from a flight to safety, particularly companies with a global presence [4][17][18]. 5. **Investment Recommendations**: Focus on higher-quality, defensive names with international exposure that are trading below historical averages. Specific sectors to watch include Soft Beverages, Household and Personal Care, and defensive Broadline Retailers [6][21]. Additional Important Points 1. **Key Themes and Catalysts**: - Tariff volatility affecting apparel and household products - GLP-1 drug uptake impacting consumer behavior - Bifurcation of consumer spending due to benefit cutbacks affecting lower-income households while higher-income households may benefit from tax breaks [5][20]. 2. **Subsector Focus**: - In Consumer Staples, companies with international exposure are preferred. - In Consumer Discretionary, names with reliable earnings performance are recommended, with caution advised for those lacking quality bias [6][21]. 3. **Upcoming Events**: Anticipated events such as the World Cup and U.S. 250th anniversary celebrations could provide additional support for certain sectors like Hotels, Resorts, and Cruise Lines [6][21]. Performance Ratings - Companies rated as Outperform include BRBR, CPB, MDLZ, MKC, and others, while CAG, GIS, HSY, and others are rated as Market-Perform. DECK and TGT are rated Underperform [9][10]. Conclusion - The U.S. Consumer sector is navigating a challenging landscape in 2025, with specific investment strategies recommended to capitalize on valuation opportunities and mitigate risks associated with economic pressures and consumer behavior shifts [12][19].