Looking for a Safe Haven Investment? Drive Through the Golden Arches

In uncertain times like these, some run to gold. Wells Fargo is turning instead to the Golden Arches.

The bank’s analysts recommended fast food giant McDonald’s as a defensive stock, despite signs of overall weakness in the sector, which has been bitten especially hard in recent days.

Chowdown Slowdown

As the US — and everywhere else — has digested multi-year inflation, pressure has mounted disproportionately on the restaurant sector. The USDA forecasts a 3.6% increase in food-away-from-home prices this year, compared with only 2.2% for overall food prices, continuing a trend from previous years in which the cost of eating out has gone up faster than the cost of eating in (one influencer’s video on how to make an Egg McMuffin at home has 4.3 million views on YouTube).

McDonald’s is among those not lovin’ it, having seen two consecutive quarters of weak sales in the past year. But it’s hardly alone: Chipotle, which had reliably increased profits in recent years, last week reported its first decline in same-store sales since the pandemic shut down restaurants in the second quarter of 2020. The 0.4% drop in sales at restaurants open at least a year surprised Wall Street, which expected roughly 1.4% growth, and the Mexican-inspired chain’s shares are now down 14% this year. Meanwhile, Jack in the Box said it plans to close up to 200 locations, or 10% of its restaurants, and that it’s considering selling the Del Taco chain it bought only three years ago — its shares are down 41% this year.

With Americans mired in fears of a recession and expecting more inflation — the University of Michigan’s closely watched consumer sentiment index tanked 8% to 52.2 in April from a month earlier, according to the latest survey released Friday — there are further concerns that consumer spending could see a pullback. All of which raises the question: McDonald’s a defensive stock? Here’s Wells Fargo’s case:

• McDonald’s shares, already up 9.2% in 2025, have moved in stark contrast to the falling S&P 500, which is down 6%, and the AdvisorShares Restaurant ETF, which is down 4.3%. The bank thinks its value options could provide a boost if consumers opt to trade down on more expensive meal purchases.
• Wells Fargo analysts said that, even as consumer credit card spending fell 1.9% in the first quarter of the year from the fourth quarter of 2024, McDonald’s proved more resilient, showing only a 0.6% drop. At the start of the year, McDonald’s launched a revamped “McValue” menu including expanded choices such as chicken nuggets for its $5 meal deal — the company also rolled out a group of “buy one, add one for $1” promotions.

New New: While fast food industry CEOs have warned this year that economics may take a bite out of sales momentum, Taco Bell is more bullish than a matador, forecasting 8% sales growth in the first quarter. That’s in part, executives said, because of value options, but also key are new menu items that generate buzz and draw in consumers, like a quesocrisp taco with a cheese shell. McDonald’s said, as of May 5, it will make its first permanent menu addition in half a decade, putting chicken strips back on its menu after a five-year absence.