US Consumer Giants Retreat from Highs, S&P Near New Highs Driven by AI

Nike's stock price has retreated about 78% from its historical high in November 2021, currently hovering around $36, a low not seen since 2014, with a year-to-date decline exceeding 40%. McDonald's, also in the consumer sector, has dropped about 22% this year, making it one of the worst performers in the Dow; PepsiCo has fallen about 25% from its year-to-date high, hitting a 52-week low.

Approximately 60% of S&P 500 constituents have declined over 20% from their historical highs. Lowe's, part of the home improvement chain, has also seen a double-digit retreat and reached a year-to-date low. Pizza Hut's parent company, PepsiCo North America, is facing profit pressure, with organic growth far below reported revenue growth, indicating that price increases and consolidation are masking weakening volumes.

The entertainment and travel sectors are also cooling: reports indicate a 30-40% retreat in streaming, ride-hailing, and online travel platforms from their peaks. Valuations for packaged consumer goods like Pizza Hut, Coca-Cola, and beer have compressed from premium levels in 2021 to forward P/E ratios of just over ten times, with dividend yields passively rising, reflecting weakened pricing power rather than mere sentiment.

Meanwhile, the S&P 500 and Nasdaq are approaching or hitting new highs again, driven by weights concentrated in artificial intelligence, semiconductors, and massive cloud capital expenditures. The equal-weighted S&P has recently underperformed the market-cap-weighted index, with the proportion of stocks above the 50-day moving average declining, and the number of 52-week lows outnumbering new highs, indicating a simultaneous occurrence of index highs and internal breadth contraction.

These companies' revenues directly stem from discretionary spending and high-frequency consumption in household budgets. After high interest rates, rising energy prices, and tariff costs, the volume-price combination for sneakers, dining out, home improvement, and packaged foods has deteriorated, with stock price retreats occurring before the official retail data's narrative of "overall still growing."

In market mechanics, the sellers are active funds, quantitative trend accounts, and institutions shifting from discretionary consumption to AI weights, while the buyers are those focused on dividend and cash flow discounting, starting to accumulate shares in Walmart, Costco, and McDonald's after essential consumption fell out of premium. Funds are flowing from sensitive brand stocks to computing power, storage, and power infrastructure. The beneficiaries are the AI supply chains with the highest weights in the index; the pressured parties are brand owners and franchisees reliant on discretionary income from the American middle class. The business itself has not disappeared, but the discount rate and average transaction price have both risen, leading to lower equity values corresponding to the same cash flow.

Source: Public Information