Market Quote: The Goods on Consumer Stocks
Author: The editor's desk
June 5, 2025
Market A weekly analysis of what’s happening in global financial markets from the perspective of AGF’s investment management team.
Consumed by Tariffs
A few key themes have emerged across the consumer space this earnings period.
First, on the state of consumer – overall trends remain unchanged with higher income cohorts holding in better, while lower income consumer continues to feel the pinch of heightened sociopolitical uncertainty as well as the cumulative effects inflation. Incrementally in Canada, we have seen some signs of more discretionary areas of spending such as travel weakening,
Consumer-based companies, meanwhile, have taken different approaches to managing the impact of tariffs on their businesses, with some opting to retract guidance given the uncertainty, and others quantifying the impact of worst-case scenarios using estimates ranging between US$300 million to over US$1 billion in incremental costs.
At the same time, many consumer-based companies have highlighted cost mitigation efforts including the adoption of Artificial Intelligence (AI) and other supply chain or efficiency optimizations to absorb some of the incremental costs. Moreover, they have pointed to revenue growth management and merchandising strategies.
Still, companies in the consumer sector often indicated that they will ultimately raise prices on some affected items while remaining thoughtful on the scope and magnitude of increases given the consumer remains extremely selective and consumption is increasingly shifting to alternatives like private label offerings and to club and discount retailers.
Even without considering the effect of tariffs, companies are starting to see signs of higher cost inflation across the supply chain, from raw material inputs to packaging and transportation.
Finally, the trend of health and wellness continues, with spending on “better for you” products and other healthier living related food items increasing (even at higher price points), at the expense of salty snacks and other food groups that are perceived as less healthy.
X Factor
North American equity markets rebounded in May, but gains in the U.S. were linked most often to growth factors, whereas Canada’s returns were frequently related to value characteristics. *
In particular, U.S. listed companies with strong operational cash flow growth over one year performed well last month, as did those with earnings growth projections that were revised upward by analysts. Other growth factors that were associated with healthy U.S. gains in May include dividend growth over one year and earnings per share growth over one year.
In Canada, it was value factors such as price-to-book and forward-price-to-earnings earnings that were most connected to solid returns.
As for the factors coupled with weaker returns, value was perhaps the big laggard in the U.S., while short-to-medium-term momentum factors were among the weakest in Canada.
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*Based on research from AGF Investments using data from Bloomberg. U.S. listed companies used in our calculations are members of the S&P 500 Index and are ranked by quintile across GICs sectors. The return is the spread return between equal-weighted quintile 1 and equal-weighted quintile 5. Canadian-listed companies used in our calculations are members of the S&P/TSX Composite Index and ranked by quintile across the entire index universe. The return is the spread return between equal-weighted quintile 1 and equal-weighted quintile 5. Past performance is not indicative of future results. One cannot invest directly in an Index.
The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds, or investment strategies.
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