8 Stock Picks to Buy With Tax Season Set to Drive a Wave of Consumer Spending
- BofA says Americans’ tax refunds are a tailwind for some stock sectors.
- The bank flagged two categories of retail stocks that benefit this tax season.
- Value retailers like Dollar General, and “broadline” retailers like Walmart could see gains this tax season.
Tax season approaches, and with the promise of refunds hitting Americans’ bank accounts comes potential positive impacts for the stock market.
Bank of America analysts think that coming tax refunds will provide fresh stimulus for the US economy in the form of both bigger refunds and smaller tax bills. The bank’s analysts estimate that the total boost to GDP could amount to as much as $140 billion.
Some of the value could come from the state and local tax (SALT) cap, no tax on overtime or tips, and an increased standard deduction for seniors. BofA’s US Economics team estimates that these policies will boost returns by 26%, adding $1,000 per family on average.
But that’s not the only positive force the bank is eyeing. According to BofA’s Robert Ohmes, two areas of the stock market’s wider retail sector are poised to win amid this year’s lighter tax burden for US consumers.
He breaks down the categories into value and broadline stocks. Here are the winners he sees in each category.
Value retail
Ohmes thinks value retail names will get a boost as lower and middle-income tax filers are likely to spend refund cash on consumer staples and paying down debt.
“Tax refunds in the lowest (sub $3K) refund buckets appear to support growth in discretionary purchases (general merchandise) along with growth in spending on Groceries & Gas,” the analyst said.
Broadline retail
Broadline retail is a category that the bank associates with higher-income households. Ohmes said Costco and Walmart will benefit as high earners gravitate toward these stores and as the companies double down on same-day delivery and e-commerce ventures.
“As a result, we believe WMT & COST could see greater benefits from tax refunds in 2026 vs. LY as well as potentially higher exposure to middle- and higher-income filers who benefit from higher standard deductions for seniors and the higher state and local tax (SALT) cap,” he noted.
The analyst added that he also expects broadline retailers to benefit from an increase in spending on consumer electronics, which could benefit other retail names like Best Buy.
Many retailers saw solid gains in Tuesday’s session amid a pronounced rotation out of tech stocks. Walmart jumped 3% to hit a $1 trillion valuation.
