Three Consumer Discretionary Stocks to Watch After the Midterms

In this week’s video, we break down the sharp move higher in consumer discretionary following the midterm election results, along with the market dynamics leading up to Election Day. We also highlight three consumer discretionary stocks in our portfolio that we would consider adding to if the impressive market rotation continues. Over the past month, consumer discretionary has been playing serious catch-up among U.S. sectors and has moved into a leadership position. This rotation is helped by the move out of energy—a sector we have been heavily focused on this year that remains the clear leader on the year-to-date scorecard. Energy has come off sharply, pulling inflation expectations, nominal yields, and the U.S. dollar lower. Lower inflation expectations, along with the election now behind us, could ease pressure on the Federal Reserve to keep rates elevated. WTI crude has dropped from above $100 in late October to about $88, and the five-year breakeven inflation rate has followed it lower to 2.39%.

Turning to the Consumer Discretionary Select Sector SPDR (XLY), the downtrend that defined 2026 has ended with a bang. XLY jumped 4.5% to $122.56, clearing the trend line from its January high and moving back above its 21-, 50-, and 200-day moving averages. The XLY/SPY ratio has also broken its year-long downtrend after hitting an October low. Easing inflation pressures are doing much of the heavy lifting. We are also seeing a real broadening of the market as technology continues to underperform the S&P 500. That tells us we may need to broaden exposure in our portfolios, potentially led by a resurgence in the American consumer.

Here are the three discretionary names we own:

Lennar (LEN)
Lennar’s earnings are still shrinking, with fiscal third-quarter EPS of $1.23 coming in below consensus and home sale gross margins hovering near 16% as average selling prices continue to slip. Debt on the balance sheet is moderate, and the company has held production steady through the downturn. This interest-rate-sensitive stock should continue to benefit if mortgage rates decline.

SharkNinja (SN)
SharkNinja’s Q3 revenue grew 21% to nearly $2 billion, while adjusted EBITDA climbed 46% to a 23% margin. Management also raised its full-year guidance. Gains came across the board, with cooking and beverage sales up 37% and beauty up 46%, leaving the company well positioned for the holiday season, especially as lower gas prices give consumers more spending power.

Amazon (AMZN)
Amazon’s Q3 operating income rose 61% to $28.1 billion, while revenue grew 12% and AWS growth accelerated to 39%. The company’s contracted backlog also exceeded $500 billion. The stock has pulled back amid concerns over its roughly $220 billion capital spending plan for 2026. We see that weakness as an opportunity to own Amazon’s retail and advertising businesses, alongside its rapidly growing cloud operations.

Todd Gordon is the founder of Inside Edge Capital, LLC.

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