Consumer stocks are poised to benefit from the Federal Reserve’s expected rate cut next week, leading Evercore ISI to recommend investors buy shares of some consumer-facing companies that are trading at a discount after underperforming this year. Historically, consumer staples and consumer discretionary stocks have been “standout outperformers” after the central bank starts lowering, or resumes a cycle of interest rate reductions, Evercore analysts said in a note to clients last weekend. Interest rate futures prices suggest about a 90% probability that the Fed will cut rates another quarter percentage point, to 3.50%-3.75%, at its last meeting of the year next week, the CME FedWatch tool shows. The Fed also eased policy in September and October, after three reductions in late 2024. “While this cutting cycle has been different given the extended pause, the ‘Tariff Tantrum’, the dominance of the ‘AI Revolution’ and the ‘K-shaped Economy,’ the historical evidence is clear – both Consumer Staples and Consumer Discretionary sectors are standout outperformers on a 6- and 12 month basis once the Fed cutting cycle starts, or in this case, has restarted,” the analysts wrote in their note. Next week’s expected rate cut adds to other tailwinds for consumer stocks, including the tax cuts embedded in last summer’s Big Beautiful Bill that could eventually stimulate consumer spending and the chance for “tariff rebate” checks. As a result, Evercore ISI pointed to several stocks that have been battered in the market over the past year that may now be on the verge of rebounding. The investment bank’s screen is made up of stocks belonging to the Russell 3000 that meet the following criteria: Returns have been negative YTD 12-month forward price-to-earnings valuations trade at a discount to the five year average 12-month forward net margins are below their five year average Here are some stocks named by Evercore ISI that could rise following the Fed’s rate cuts and other policy changes that may result in higher consumer spending. Bath & Body Works The personal care retailer has struggled due to several “macro consumer pressures” that led the company to lower its full-year outlook in November, according to management. Reflecting that slowdown, Bath & Body Works stock has plunged 55% since the year began. Under Armour Under Armour has tumbled 41% in 2025, faced with mounting competition from upstarts such as On Holding and Hoka. Lululemon Athletica The athletic apparel retailer has contended with softening same-store sales in the U.S. and tariff headwinds. Lululemon Athletica stock has plummeted 52% year to date.
