Tariffs, Tinsel & Tight Budgets: Mastercard's Holiday Spend Forecast

Mastercard Incorporated MA projects U.S. holiday retail sales (excluding autos) to rise 3.6% year over year between Nov. 1 and Dec. 24, 2025. That is a step down from the 4.1% gain recorded last season, according to the Mastercard Economics Institute. Online sales are set to climb about 7.9%, while brick-and-mortar sales are expected to post a more modest 2.3% increase.

Shoppers are becoming increasingly price-conscious. Inflation and tariffs are prompting earlier bargain-hunting, heavier reliance on promotions and stronger demand for discounts. Gift cards are also gaining popularity as cost-managing presents in this uncertain climate. The labor market continues to lend support, while hiring momentum has eased, lower layoffs and steady wage growth are still cushioning consumer spending.

Tariffs loom large this season, as they may drive up the cost of key holiday goods such as toys, apparel, and decorations. How retailers handle these tariff-driven expenses, whether absorbing them or passing them along, will determine how much household budgets get squeezed. As a result, shoppers are expected to show heightened price sensitivity, with some trading down to cheaper alternatives while others focus on tariff-insulated purchases.

Beyond pricing pressures, social media is set to heavily influence Gen Z buying choices, shaping what items trend and when they are purchased. Altogether, tariffs stand out as the defining wild card of the 2025 holiday season, impacting what consumers buy, when they shop and how much they ultimately spend.

Rising Transactions to Boost Payment Companies

With holiday spending increasing, payment companies including Mastercard, Visa Inc. V and American Express Company AXP are expected to witness higher transaction volumes. As online sales and use of gift cards are expected to grow, these companies will likely see higher traffic in their networks. Mastercard and Visa have significant shares in everyday spend categories; this will provide some insulation from tariff-related uncertainties. American Express, on the other hand, is more exposed to affluent customers, which works as a cushion during an uncertain economic environment. However, if tariffs hit luxury categories or upscale retail hard, AmEx volumes will likely soften.

Mastercard’s Price Performance, Valuation and Estimates

Shares of Mastercard have gained 11.3% year to date, outperforming the broader industry’s 4% growth.

From a valuation standpoint, Mastercard trades at a forward price-to-earnings ratio of 32.12X, higher than the industry average. Mastercard carries a Value Score of D.

The Zacks Consensus Estimate for Mastercard’s 2025 earnings implies an 11.8% rise year over year, followed by 16.5% growth next year.

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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