Bank of America Says One Stock Sector Could Outperform ‘Quite Aggressively’ if Fed Continues To Cut Rates

Bank of America (BofA) says one sector of the stock market could wildly outperform the rest if the Federal Reserve continues to cut interest rates.

In a new 2026 outlook meeting, BofA head of US Equity and Quantitative Research Savita Subramanian says that consumer staple companies, or lower price-point retailers, will greatly benefit if the Fed continues to loosen monetary policy.

“From a sector perspective, if the Fed is cutting and potentially stimulating consumption, I think that could actually provide an offset to some of the pain that that lower-income consumer has been feeling.

So what we’ve found during periods of Fed cutting cycles is that consumer staples companies, lower price point retailers, tend to outperform the market quite aggressively.

And that would be a big change from the last few years where consumer staples and food stocks were suffering more from inflation. The lower-income consumer was feeling the more acute pinch of inflation in rent, utilities, insurance, food, et cetera.”

Subramanian notes that upcoming midterm elections may sway policies toward being more populist-minded rather than trade-focused.

“I think also as we move into the midterm elections of next year, we could see more friendly, populist policy rather than the more trade-focused, potentially inflationary policy of this year.

So those could be really positive drivers for a comeback in that broader consumption story.”

Generated Image: Midjourney