RIA Ideas - Consumer Surplus

Vinay Tolia |
Categories
Weekly Market Commentary

Growth Note · Worst of XLY / XLP

Americans spent 6% more at stores and restaurants than a year ago, and the stocks that sell to them are down more than 5% this year.

Retail and restaurant sales rose 6.0% from a year ago (RSM via Daily Chartbook, 9/17/26), yet XLY, the consumer discretionary ETF, is down 5.3% this year while staples (XLP) are up 8.6% and the S&P 500 (SPY) is up 14.3% (Yahoo Finance, 9/22/26 close).

Discretionary plus staples are now the smallest slice of the S&P 500 on record (Bespoke via Vol Pulse, 9/16/26), yet store sales, jobs, wages and card balances all still look healthy in the four readings below. The stocks may simply be running a step behind the shopper.

The shopper keeps spending while consumer stocks trail the market

Two tiles: retail and restaurant sales up 6.0 percent from a year ago with 12 of 13 categories higher (RSM, 9/17/26), and XLY down 5.3 percent year to date as of the 9/22/26 close. Below, year-to-date return lines since 12/31/25: S&P 500 (SPY) up 14.3 percent, staples (XLP) up 8.6 percent, discretionary (XLY) down 5.3 percent.

Retail and restaurant sales: RSM via Daily Chartbook, 9/17/26. XLY, XLP, SPY: Yahoo Finance, daily closes 12/31/25 through 9/22/26 · marinelayeradvisors.com/insights

Four more signs the consumer is still standing

Bar chart of Redbook same-store retail sales versus a year ago for the seven weeks ending 8/8 through 9/19/26: plus 8.3, 7.6, 9.1, 9.6, 8.3, 8.5 and 7.6 percent. Below, three tiles: August payrolls up 162,000 with unemployment steady at 4.1 percent; the Atlanta Fed Wage Growth Tracker at plus 4.1 percent in August, up from 3.8 percent in July; and credit card debt at 5.3 percent of disposable income versus a 6.4 percent average from 2003 to 2019.

Redbook: Koyfin via Daily Chartbook, weeks ending 8/8 to 9/19/26. Payrolls and unemployment (August): Haver Analytics via Daily Chartbook, 9/5/26. Wage Growth Tracker (August): Atlanta Fed via Daily Chartbook, 9/12/26. Card debt to disposable income: Ryan Detrick via Daily Chartbook, 8/20/26.

Here is an example: Goldman Sachs indicatively priced this on 9/22/26 (terms may change with market conditions):

3-Year Worst-Of Growth Note

Goldman Sachs · Worst of XLY / XLP

Upside at maturity

220% participation on the worst performer’s gain from its start, uncapped, paid only at maturity

Barrier

70% of initial (European knock-in), observed at maturity only. Below it, principal is reduced by the worst performer’s full decline from its start

Principal

All payments on the note are obligations of the issuer and are subject to its credit risk.

Coupons

None. Point to point, no early call

Tenor

3 years

The note pays on whichever of XLY and XLP does worse at maturity, so a strong finish by one may not offset a weak finish by the other. The two have moved largely independently (1-year daily return correlation of 0.17, Yahoo Finance, 9/22/26), which may raise the chance that one of them finishes below the barrier compared with either fund alone. Principal is at risk below the barrier: if the worst performer finishes under 70% of its start, the holder takes its full decline. Any gain is paid only at maturity; nothing is paid along the way.

These were indicative levels: Goldman Sachs indicatively priced this on 9/22/26. Pricing can vary depending on market conditions.

Here’s how the note pays at maturity:

Payoff diagram at maturity: if the worst of XLY and XLP finishes above its start, the note pays 220 percent of that gain, if the issuer performs. If the worst performer finishes down 0 to 30 percent, principal is returned, if the issuer performs. Below minus 30 percent, the holder takes the worst performer's full decline from its start. A dashed 1:1 line shows owning the fund outright.

Want to see more thematic trades for your customers?

Any investment decision must be based solely on the issuer's prospectus and pricing supplement, which are available on request.

This material is intended solely for the recipient and may not be forwarded, reproduced or distributed to retail investors.

This material is for informational purposes only and does not constitute a recommendation or an offer to buy or sell any security. Data sourced from public sources and has not been independently verified. All terms shown are indicative, were priced by Goldman Sachs on 9/22/26, and are subject to change, final pricing, issuer availability and market conditions at the time of execution; they do not represent an offer or a quotation. Return of principal depends on the issuer performing its obligations in full, and every outcome described in this material assumes it does. The notes are unsecured senior obligations of the issuer, are not guaranteed, insured or collateralized, and an issuer default or credit deterioration could result in the loss of some or all of an investment regardless of how XLY and XLP perform. If the worse performing of XLY and XLP finishes below its barrier at maturity, the investor is exposed to that fund’s full decline from its initial level. The notes pay no coupons, are not listed on any exchange and may have limited or no liquidity before maturity. Retail sales, Redbook, payroll, wage and card debt figures describe the U.S. economy and consumer and are not a description of the holdings of XLY or XLP. Past performance is not indicative of future results. Structured notes involve risks including potential loss of principal and may not be suitable for all investors.