Thoughts on the Market: "Backpacks, Laptops and Sneakers" – Detailed Summary

Podcast Information:

• Title: Thoughts on the Market
• Host/Author: Morgan Stanley
• Description: Short, thoughtful, and regular takes on recent events in the markets from a variety of perspectives and voices within Morgan Stanley.
• Episode: Backpacks, Laptops and Sneakers
• Release Date: August 8, 2025

Introduction

In the August 8, 2025 episode of Thoughts on the Market titled "Backpacks, Laptops and Sneakers," host Michelle Weaver, US Thematic and Equity Strategist at Morgan Stanley, delves into the dynamics of the second-largest shopping season in the United States: back-to-school. Weaver explores what this pivotal shopping period reveals about broader market trends, consumer sentiment, and spending behaviors.

Consumer Sentiment and Economic Confidence

Weaver opens the discussion by highlighting the current consumer mood. According to Morgan Stanley's latest proprietary consumer survey:

• Economic Confidence Decline:

  • "Confidence in the economy is sliding," Weaver notes at [00:45].
  • Only 32% of consumers believe the economy will improve over the next six months, a drop from 37% last month and 44% in January.
  • Meanwhile, 50% expect the economy to worsen, indicating growing pessimism among consumers.

• Household Finances:

  • 40% of consumers anticipate an improvement in their financial situation, while 30% foresee it worsening.
  • Although the net score remains positive, it has decreased both month-over-month and since the beginning of the year.

Key Insight: "Consumers are feeling the pinch, and inflation remains their number one concern," Weaver summarizes at [02:10].

Inflation and Tariff Concerns

While consumer confidence is waning, certain areas show resilience:

• Tariff Worries:
  • Over 43% of consumers were very concerned about tariffs in April post-Liberation Day, but this figure has decreased to 30% by August [02:40].
  • Fewer consumers are planning to reduce spending due to tariffs, with almost 30% intending to spend more despite these concerns.

Weaver comments: "That's a sign of resilience and perhaps necessity as families prepare for the school year," at [02:50].

Back-to-School Spending Trends

Back-to-school shopping serves as a barometer for consumer behavior. Key findings include:

• Shopping Participation:

  • Nearly 50% of US consumers have already started shopping or plan to shop for the upcoming school year, aligning with trends from previous years [03:10].

• Spending Patterns:

  • 47% of these shoppers are spending more than last year.
  • Only 14% plan to spend less, resulting in a significant NET positive of 34% [03:25].

Weaver emphasizes: "This is a significant indicator of consumer willingness to invest in essential and non-essential items despite economic uncertainties," at [03:15].

Spending Categories: What’s in the Cart

Analyzing where consumers are directing their spending reveals critical sectoral insights:

• Primary Categories:
  • Apparel: Over 90% of shoppers are purchasing clothing.
  • Footwear: Follows closely behind apparel.
  • School Supplies: Rounding out the top three [04:00].

Weaver notes: "Apparel leads followed by footwear and then supplies, highlighting where retailers can focus their strategies," at [04:10].

Beyond the Classroom: Additional Consumer Spending

Consumer spending isn't confined to school-related items:

• Travel Plans:
  • Approximately 60% of consumers intend to travel within the next six months.
  • Visiting Friends and Family remains the top reason for travel, consistent with last year's data [04:30].

Weaver observes: "This consistency indicates that despite economic pressures, experiences and personal connections remain a priority for consumers," at [04:35].

Conclusions and Market Implications

Drawing from the data, Weaver offers actionable insights for investors and market watchers:

• Consumer Resilience: Despite cooling sentiment and economic concerns, spending on seasonal needs like back-to-school items remains robust.

• Retail Opportunities: Categories such as apparel and footwear are outperforming, presenting potential growth areas for retailers moving into the fall season [05:00].

• Market Signals: Consumer spending patterns not only reflect current economic conditions but also provide a glimpse into future market directions.

Final Takeaway: "Consumer sentiment is cooling, but spending, especially for seasonal needs, is holding up. This duality suggests that while there are apprehensions about the economy, essential and strategic spending continues to drive market segments forward," Weaver concludes at [05:15].

Key Quotes

• "Confidence in the economy is sliding," – Michelle Weaver [00:45]
• "Consumers are feeling the pinch, and inflation remains their number one concern," – Michelle Weaver [02:10]
• "That's a sign of resilience and perhaps necessity as families prepare for the school year," – Michelle Weaver [02:50]
• "This is a significant indicator of consumer willingness to invest in essential and non-essential items despite economic uncertainties," – Michelle Weaver [03:15]
• "Apparel leads followed by footwear and then supplies, highlighting where retailers can focus their strategies," – Michelle Weaver [04:10]
• "This consistency indicates that despite economic pressures, experiences and personal connections remain a priority for consumers," – Michelle Weaver [04:35]
• "Consumer sentiment is cooling, but spending, especially for seasonal needs, is holding up. This duality suggests that while there are apprehensions about the economy, essential and strategic spending continues to drive market segments forward," – Michelle Weaver [05:15]

Conclusion

The "Backpacks, Laptops and Sneakers" episode provides a comprehensive analysis of consumer behavior during the back-to-school season, offering valuable insights into economic confidence, spending resilience, and sectoral opportunities. By understanding these trends, investors and businesses can better navigate the evolving market landscape.