Favorable Outlook for Retail Stocks After U.S. Presidential Election

With the U.S. presidential election behind us and Donald Trump securing a decisive victory, Citi analysts anticipate a favorable near-term outlook for retail stocks.

Citi said in a note Wednesday that the recent election season, which often stirs consumer uncertainty, has concluded, allowing the focus to shift toward the holiday shopping season.

The bank believes consumers will likely embrace the holiday season, despite the country’s politically divided response.

Citi sees several tailwinds boosting retail stocks in the coming months. The analysts noted that weather has been unseasonably warm, which negatively impacts the usual seasonal purchases. However, as cooler weather approaches, pent-up demand for winterwear like coats and sweaters may soon be released, providing a lift for retail sales.

Investor sentiment in retail stocks has been cautious lately due to election-related uncertainty. Citi pointed out that recent credit card data has not indicated a significant drop in consumer spending, suggesting underlying consumer strength remains intact.

Historically, November is the best month for retail stocks, averaging a 6.4% gain over the past decade, outperforming the S&P 500 by an average of 262 basis points. Citi reminded investors that the "Santa Claus Rally" is real, suggesting strong end-of-year performance for retail stocks.

However, analysts warned that policy risks may arise. Trump’s victory could signal an increase in tariffs on Chinese imports, potentially impacting retailers dependent on foreign goods. Stocks exposed to these risks include Steven Madden (NASDAQ:SHOO), Oxford Industries (NYSE:OXM), Five Below (NASDAQ:FIVE), Best Buy (NYSE:BBY), and Boot Barn (NYSE:BOOT).