Inflation's Silver Lining: Where to Bet on Reshoring and Resilient Retailers

The U.S. economy is at a crossroads. Inflation, though moderating, is still stubbornly lodged in sectors like shelter and healthcare, while energy prices crater and tariffs reshape global supply chains. Consumers are pulling back on discretionary spending, but opportunities are ripe for investors who can spot the resilient retailers, automation-driven tech firms, and reshoring manufacturers that will thrive in this environment. Let me break it down.

The Inflation Landscape: What's Driving Consumer Behavior?

The latest CPI data paints a mixed picture. Year-over-year inflation dipped to 2.4% in May 2025, but shelter costs (up 4.0%) and healthcare (2.7%) remain red-hot. Meanwhile, energy prices fell 3.5% annually, and food at home dropped 0.4%—a win for grocery shoppers. But food away from home (restaurants, etc.) rose 3.9%, signaling a shift toward home-based dining.

This isn't just about price tags—it's about consumer priorities. Discretionary spending on apparel and travel is wilting, but essentials like shelter, healthcare, and education are holding firm. That's your roadmap.

Sector Spotlight #1: Retailers Built for Inflation

Not all retailers are created equal. Avoid the mall-based fashion chains (Gap, Urban Outfitters) and luxury discretionary (Michael Kors) where sales are cratering. Instead, focus on discount giants and healthcare staples:

1. Costco (COST): With annual membership renewals up and a focus on affordable staples, Costco thrives when consumers cut back on extras but still seek quality.
   

2. Walgreens Boots Alliance (WBA): Healthcare costs are soaring, and this pharmacy leader benefits from rising demand for prescription drugs and in-store clinics.

3. Dollar General (DG): The discount retailer's sales in rural markets—where inflation hits hardest—are surging.

Avoid: Retailers like Target (TGT) that rely on discretionary categories like apparel. Their recent stock struggles reflect this shift.

Sector Spotlight #2: Automation Tech—The Fuel for Reshoring

Manufacturers are reshoring to dodge tariffs and proximity to U.S. demand, but they need automation to compete with global labor costs. Here's where to bet:

1. Rockwell Automation (ROK): This industrial tech giant provides robotics and software for factories. Their partnerships with reshoring firms are booming.
   

2. Teradyne (TER): A leader in automated testing equipment, critical for semiconductor and automotive reshoring.

3. C3.ai (AI): AI-driven supply chain tools help companies optimize reshored operations.

Watch: Tesla (TSLA) might be a laggard here—its focus on China and gigafactories doesn't align with reshoring trends.

Sector Spotlight #3: Manufacturers Riding the Reshoring Wave

The BLS's updated leased vehicle methodologies and tariff-driven costs are pushing production back to the U.S. Look for companies in:

1. Furniture: La-Z-Boy (LZB) and Herman Miller (MLHR) are retooling domestic factories to avoid tariffs on imported goods.

2. Auto Parts: BorgWarner (BWA) and Wabco (WBC) are benefiting from reshored supply chains for electric vehicles.

3. Industrial Metals: Albemarle (ALB) supplies lithium for EVs—a key U.S. reshoring target.

The Red Flags: Discretionary Sectors to Avoid

The data is clear: avoid sectors where prices are falling and demand is weak:

• Travel: Airline fares (down 2.8% annually) and cruise lines (Carnival, Royal Caribbean) are struggling.
• Apparel: Gap (GPS) and Aeropostale (AERO) are casualties of the “no frills” era.
• Tech Peripherals: TV and electronics sales are slumping as consumers prioritize essentials.

Final Take: Play Defense, Then Offense

The economy isn't in freefall, but it's no time for recklessness. Stick with resilient retailers, automation leaders, and reshoring manufacturers. Avoid the discretionary trap.

In a world of mixed signals, this strategy lets you profit from both inflation's winners and the reshoring revolution. Stay disciplined—and stay ahead of the curve.

This is not financial advice. Always consult a professional before making investment decisions.