Walmart will continue to benefit from consumer trade down in 2026: Argent Capital's Jed Ellerbroek
Speakers
Jed Ellerbroek
— Portfolio Manager, Argent Capital Management
Summary
Jed Ellerbroek of Argent Capital Management discusses his 2026 market outlook, highlighting TransDigm, scale retail, and a constructive S&P 500 view. He favors Amazon for growth and distribution advantages, sees Walmart benefiting from trade-down and high-end consumers, and expects big U.S. retailers to keep taking share. He also identifies capital-markets-funded AI infrastructure as the biggest risk, calls sticky inflation a constraint on rate cuts, and says healthcare regulation is the key midterm-election exposure.
- TransDigm is favored on reasonable valuation and strength across commercial aerospace, aftermarket, and defense.
- Big U.S. retailers, especially Amazon, Costco, and Walmart, are expected to keep outgrowing peers.
- Amazon is the preferred mega-cap retailer due to faster growth and logistics/robotics investment.
- Walmart is seen as well positioned by consumer trade-down and high-end customer growth, though valuation is at a 10-year high.
- S&P 500 upside is tied to expected 14% earnings growth, falling rates, tax policy, and IPO/M&A activity.
- AI infrastructure funded by capital markets, highlighted by CoreWeave and Oracle, is viewed as the biggest market risk.
- Sticky inflation may restrain Fed rate cuts; healthcare providers and insurers are most exposed to midterm regulatory shifts.
Ideas
TransDigm has all three end markets firing
TransDigm offers a reasonable valuation after underperforming in 2025, and its three end markets are firing at once: commercial aerospace production and deliveries, aerospace/defense aftermarket demand, and a U.S. defense budget still growing at a strong double-digit rate. It also announced a sizable acquisition, which supports the company-specific outlook.
Scale wins in U.S. retail
Big is winning in U.S. retail: Amazon, Costco, and Walmart are the three largest retailers, they are outgrowing almost everyone else, and they are capturing most national retail sales growth. He expects this scale-driven share gain to continue.
Scale wins in U.S. retail
Among the big retailers, Amazon is favored most because it is growing faster than Walmart and Costco and is widening its distribution advantage over peers through heavy investment in warehouse robotics and rural warehouse expansion, which should drive additional growth.
Scale wins in U.S. retail
Walmart is well positioned because it has benefited from consumer trade-down and its fastest-growing customer segment is now the high-end consumer. That supports continued share gains, though the stock trades at about 40x next-12-month earnings, a 10-year high.
S&P 500 supported by earnings growth
He is constructive on the S&P 500 for another possible double-digit year, based on expected 14% aggregate earnings growth in 2026 led by tech with contributions from industrials and financials, falling interest rates, a new Fed chair, the tax bill, and rising IPO/M&A activity. He also says valuation is not a major concern because it reflects the profitability and growth of big tech.
CoreWeave and Oracle financing risk
The biggest market risk is that the AI infrastructure buildout is increasingly financed by capital markets issuance, both equity and debt, rather than the strong cash flows of the big hyperscalers. Companies like CoreWeave and Oracle are relying more on capital markets to fund AI investments, and capital markets are inherently risky and volatile.
Healthcare hinges on midterm regulation
The midterm elections should matter most for the health care industry because hospital/provider groups and health insurers have earnings and business prospects that depend heavily on the regulatory environment. The Biden administration was fairly tough in those areas, while the Trump administration has eased up somewhat, making regulation a key swing factor to monitor.
