Steve Eisman, who shorted subprime mortgages ahead of the 2008 crash, says the American middle class is showing signs of stress as gas prices erode household budgets following a strong tax refund season.
Prediction markets do not yet agree.
Polymarket traders are pricing the odds of a U.S. recession by the end of 2026 at just 12%, with negative GDP growth in 2026 sitting at 11%.
The K Is Now A ‘Limping E’
Speaking on the latest Real Eisman Playbook podcast, the investor sat down with three Evercore consumer analysts who told him the K-shaped economy has evolved into something uglier.
Greg Melich, who covers Walmart (NYSE:WMT), Costco (NASDAQ:COST) and Home Depot (NYSE:HD), said the low end has always been pressured but the squeeze has crept upward.
“The middle is limping. That’s where the pressure is being felt,” Melich said.
Tax refunds drove the strongest spring shopping season since the pandemic, but were quickly absorbed by higher fuel costs following the recent Iran conflict. “The refunds basically went into the gas tank,” Melich said.
The ‘Trade-In’ Effect Is Powering Walmart
Melich pushed back on the classic “trade down” narrative, calling the shift to Walmart a “trade-in.”
Higher-income households earning over $150,000 are reportedly signing up for Walmart+ and discovering the exact same box of Cheerios arrives faster than Amazon (NASDAQ:AMZN) can deliver, at roughly $2 less.
He said the Walmart+ membership program may be approaching an “S-curve” inflection moment.
Apparel Carnage And A Luxury Outlier
Analyst Michael Binetti said Nike (NYSE:NKE) got “a little ahead of their skis” on its direct-to-consumer pivot, surrendering shelf space to running-shoe upstarts like On Holding (NYSE:ONON) and Hoka, owned by Deckers Outdoor (NYSE:DECK), as competition kept “bringing a very good pipeline of innovation.”
Eisman went further in his closing remarks, saying Nike has “lost tremendous mojo.”
Ralph Lauren (NYSE:RL), which is up 14% this year, executed the opposite playbook, pulling inventory off discount racks and lifting average prices by 60% since 2018. Nike is down 34% in the same period.
The Tradeable Setup
Polymarket traders are pricing a 54% chance of a Fed rate hike in 2026, which would further freeze the housing market. Melich said roughly 20 million homes are locked up by sub-3.5% mortgages, capping the addressable market for Home Depot and Lowe’s (NYSE:LOW).
Legacy food names including Campbell Soup Company (NYSE:CPB), Kraft Heinz (NASDAQ:KHC) and General Mills (NYSE:GIS) face a roughly 50 basis point headwind from GLP-1 drugs, according to Palmer, with SNAP reductions adding another 20 to 30 basis points as they roll out to Texas and Florida.
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