Beyond data center moratorium threats and defense stocks getting hammered, Bernstein analysts see a new consumer stock trade emerging:

We see the election results as a net positive for US Consumer equities, and US Retail, but today's improvement in our outlook will take time to materialize into stronger purchasing power for consumers.

Bernstein retail analyst Zhihan Ma wrote earlier today that Walmart, Dollar General and Dollar Tree could be potential beneficiaries if Democrats delay or reverse cuts to SNAP and Medicaid under Trump's One Big Beautiful Bill Act.

Here's what Ma and her team are thinking this morning: 

Inflation & Rates: Voters have made it clear that rising gas prices and inflation have been a key concern. A Democrat-controlled Congress will increase the pressure to de-escalate tension in the Middle East, even though there may not be any immediate resolution in sight given President Trump's veto power. The Fed is likely to keep hiking rates into 1Q27, unless inflation abates soon. If we have moderation in gas prices and rates, we see Home Improvement retailers (HD, LOW) and Auto Parts aftermarket retailers (AZO, ORLY) as key beneficiaries.

Welfare & Stimulus: Democrats will also look to soften the impact of the OBBBA and negotiate for delays, changes, if not a reversal of the OBBBA-driven SNAP & Medicaid cuts. We see low income exposed retailers (WMT, DG, DLTR) as key beneficiaries if there are any positive changes in social welfare. Meanwhile, could Democrats successfully reverse tax cuts targeting higher income consumers? If so, this does not bode well for retailers that are more exposed to higher income consumers and discretionary categories (e.g., TGT). This could come into focus as Congress tries to pass the FY27 budget; current funding is through a Continuing Resolution (CR) that runs through December 11th.

Tariffs: The Trump administration retains the power to issue additional tariffs, which doesn't require a vote in Congress. As IEEPA was struck down by the Supreme court, however, options are more limited now - Section 232 tariffs based on national security concerns and Section 301 tariffs based on unfair trade practices remain valid options but require investigations to prove validity. In the event of additional tariffs being introduced, we see the housing and auto sectors to be the most at risk. For Home Improvement retailers, we see limited downside as demand for big ticket discretionary projects is already near trough levels. For Auto Parts Aftermarket retailers, as the category is largely inelastic, we expect retailers to be able to pass on cost inflation if more tariffs are introduced.

Immigration & Labor Costs: We also expect a Democrat-controlled Congress to introduce more scrutiny around deportations and immigration restrictions. This may not be enough to reverse the overall trend but could improve labor availability on the margin and alleviate the labor cost inflation somewhat. We see this as a potential incremental positive for the Home Improvement (HD, LOW) and Auto Parts Aftermarket Retailers (AZO, ORLY) if affordability starts to improve.

More Political Stability? With a Democrat-controlled Congress introducing more checks and balances, we expect a more stable political environment over the next two years. This is generally positive news for retailers, having been through the past two years of heightened policy and macro uncertainty. For example, will we finally have a year when WMT can flow through the omni-channel profitability upside to the bottom line without another macro shock? This will certainly be well received by investors.

The analysts rate AZO, COST, DOL, DG, FIVE, LOW, and WMT Outperform. They assign DLTR, HD, ORLY, and TGT a Market Perform rating.

Taking a look at the S&P 500 Consumer Discretionary sector, the index is up 4% in the late-morning cash session and trading near highs that have capped prices over the last few years.

Wall Street clearly thinks welfare spending will be revived under next year.