Equity Beat September 2026

Equity Beat: Patios or Paris? By Eric Gordon, CFA │ September 2026

In late August, my wife and I officially became empty nesters as on an experience generates more positive emotion than asking we dropped our youngest off at college. It was bittersweet for us them to reflect on their most prized possessions. as it is for most parents during this major life transition. The Why? Experiences become woven into our identity. They create household suddenly carries less complexity and chaotic energy. stories that we tell and retell. Showing your friends your Dinner discussions shift from the kids’ daily schedules and redecorated living and dining rooms might occupy their related logistics to our own pursuits. I can finally find my shoes attention for a few minutes. A Labor Day weekend in New York in the refreshingly uncluttered hall closet. Perhaps the most – witnessing Carlos Alcaraz dazzle at the U.S. Open before palpable (and rewarding) change is that for the first time in becoming entranced by the sounds of Buena Vista Social Club decades, our discretionary spending can prioritize our own on Broadway – is the kind of experience that can find an interests. Most recently, we found ourselves debating the merits enduring home in your soul, growing richer in memory long of an updated outdoor patio versus visiting the French capital. after the luster of home décor has faded. Our conversation reflects a trade-off that millions of households For many decades, Americans have traveled near and far to increasingly face: Should the next dollar be spent creating accumulate these prized memories. In 1989, only about 3% of memories or improving the place we call home? For many U.S. citizens held a passport.1 Today, more than half do. That decades, American consumers have responded with their wallets single statistic captures how dramatically Americans’ horizons – an increasing amount of their discretionary spending has have expanded. As Americans became wealthier and more shifted toward travel, restaurants, concerts, sporting events, connected to the rest of the world, activities once reserved for cruises, and outdoor recreation. Meanwhile, categories the fortunate few became attainable for millions. associated with “nesting” – home furnishings, remodeling, and other household investments – have surrendered wallet share. CHART 2: VALID U.S. PASSPORTS, 1989-2025

CHART 1: EXPERIENCES VS. NESTING AS % OF TOTAL U.S. PERSONAL 200,000,000 CONSUPTION EXPENDITURES (PCE), ,000,000 160,000,000 16% 140,000,000 14% 120,000,000 12% 100,000,000 10% 80,000,000 8% 60,000,000 6% 4% 40,000,000

Experience Services as % of Total PCE Nesting/Home as % of Total PCE Source: U.S. State Department as of 09/09/2026. Note: “Experiences” includes recreation services, food services and accommodations, air transportation, water transportation, and foreign travel by U.S. residents. “Nesting” includes Investment Implications furnishings and durable household equipment, household maintenance, and household The obvious investment conclusion would be to own companies supplies. that sell experiences and avoid those selling possessions. Source: Bureau of Economic Analysis as of 09/09/2026. However, there is significantly more nuance to that for equity investors in the consumer discretionary sector. First, there is a While the concept of “revenge travel” peaked earlier this marked difference in performance between companies selling decade following the pandemic, it further revealed a deep more aspirational experiences than functional or utilitarian ones. secular reallocation of discretionary spending toward Next, there is an emerging category of companies we’ll experiences. In their seminal 2003 paper, To Do or to Have? distinguish as “experience enablers” that sell possessions but social psychologists Thomas Gilovich and Leaf Von Boven trade like experiential companies. Lastly, there is likely a point in found that experiential purchases tend to generate more lasting time in which possession-related stocks can outperform, happiness than material ones. Simply asking people to reflect although these have been value traps of late. Page 1

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