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Phil Orlando, Federated Hermes chief equity strategist, joins Market Domination Overtime to discuss the state of US consumers.

Orlando notes that there is a divergence between upper- and lower-income consumers. Upper-end consumers are holding up "fine" amid inflationary pressures, allowing the Consumer Discretionary sector (XLY) to perform well.

However, he explains, lower-end consumers have been "spending less and saving more" as their household budgets get squeezed by high prices.

"We are now three months into the back-to-school season. We know what June, July, and August numbers are. We'll find out what the September numbers were later this month. But on the basis of the three months of back-to-school that we have so far, retail sales are up 2% year over year. All right, that doesn't sound too bad. They're positive, but they're also the weakest back-to-school numbers that we've seen in 15 years. You'd have to go back to the depths of the recession during the global financial crisis to find worse back-to-school numbers," Orlando adds.

Thus, he notes that the back-to-school retail sales data shows that lower-income Americans are struggling. "That's going to manifest itself into what we believe is slower GDP growth going into the back-end of the year," Orlando concludes.

To watch more expert insights and analysis on the latest market action, check out more Market Domination Overtime here.

This post was written by Melanie Riehl.