Wall Street Warns SNAP Reductions Could Hit Holiday Spending

As the U.S. government shutdown drags deeper into November and casts a shadow over the holiday season, one major concern is emerging among economists and investors: the delayed distribution of federal food assistance.

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The pause in monthly payments for the Supplemental Nutrition Assistance Program (SNAP) could deal a fresh blow to both low-income households and the major grocers and suppliers that depend on their spending.

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Analysts, corporate leaders, and investors warn that the funding disruption for SNAP could add another layer of pressure to families already squeezed by tariff-driven inflation and a cooling job market. Earlier this year, the Trump administration’s tax and spending bill reduced food aid for SNAP recipients, but the current halt in benefits risks making a difficult situation even worse.

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Retailers selling household staples are already showing signs of strain. An index tracking consumer staples stocks has slipped 0.4% this year, while the S&P 500 has gained 14%, highlighting how unevenly the shutdown’s effects are being felt across industries.

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“The lower-income segments of the population are still under enormous pressure,” said Eric Clark, chief investment officer at Accuvest Global Advisors. “The delay in SNAP payments is just the latest hit. For now, a large portion of consumers will continue to prioritize value, hold back on nonessential purchases, and do what they can to get by.”

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Efforts to end the shutdown have yet to bear fruit. Senate Democrats recently scaled back their demands to reach a deal, but their proposal was swiftly rejected by Republicans.

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The One Big Beautiful Bill Act, signed by President Donald Trump in July, expanded work requirements for SNAP participants and reduced the number of exemptions — measures that were scheduled to take effect on November 1.

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However, uncertainty about who qualifies and how much aid will be provided has grown this week after the administration reversed course, announcing partial funding for the program after previously stating there would be none during the shutdown. A U.S. judge ordered the government to fully fund food benefits, though the Trump administration has appealed the ruling in an attempt to delay compliance.

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In a recent analysis, BNP Paribas Securities Corp. strategist Max Gumport and his team examined the relationship between changes in SNAP benefits and differences in sales growth between SNAP and non-SNAP households. They found a striking 91% correlation (with a one-month lag), suggesting that the planned cuts to SNAP in fiscal 2026 could trim packaged food sales growth by roughly 30 basis points.

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Gumport added that the current shutdown could have a “meaningful near-term impact” on packaged food sales since most SNAP benefits have not been distributed. He flagged U.S.-focused companies such as Flowers Foods Inc. (maker of Wonder Bread), Conagra Brands Inc. (owner of Marie Callender’s), Smithfield Foods Inc., and JM Smucker Co. as among the most vulnerable.

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The strain is already surfacing in corporate earnings calls. Grocery Outlet Holding Corp., a discount retailer, revealed this week that about 9% of its 2023 sales came from electronic benefits transfer payments — a significant portion of which is likely tied to SNAP. The company warned investors that its current guidance does not account for potential sales disruptions stemming from delayed or missed payments.

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Similarly, Kraft Heinz Co. CEO Carlos Abrams-Rivera said in prepared remarks following the company’s October 29 earnings report that high inflation and reduced food assistance are combining to create a “tough environment” for U.S. shoppers. Meanwhile, McDonald’s Corp. noted that its lower-income customers are struggling under the weight of rising housing, food, and childcare costs, and that uncertainty around SNAP funding poses a new challenge for the fast-food giant.

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When government benefits are delayed, households tend to adjust quickly — often by trading down to cheaper brands, shopping at discount retailers, or cutting back on discretionary spending. That last shift is particularly concerning for consumer-facing businesses as the holiday shopping season approaches, since it threatens demand for non-essential goods and services.

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According to Michael Baker, senior research analyst at D.A. Davidson, the longer the shutdown drags on, the deeper the impact will be on sales and earnings across the retail landscape. He noted that historically, reductions in food assistance ripple beyond grocery stores, eventually weighing on discretionary sectors such as apparel and home goods.

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“It’s never ideal to see benefits cut or delayed,” Baker said. “But with the holiday season fast approaching, an extended shutdown could magnify those challenges and hurt both consumers and retailers.”

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For now, investors and companies alike are bracing for continued uncertainty. The delayed SNAP payments represent not only a hardship for millions of American families but also a real threat to near-term consumer spending — a crucial driver of the U.S. economy. As the budget impasse drags on, the stakes grow higher for policymakers, businesses, and households heading into the most important shopping period of the year.

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