Consumer Staples Underperforming Consumer Discretionary Usually Leads to an Improving Economy and Equity Appreciation
While S&P 500 stocks continue their bullish trend, we now see consumer discretionary stocks outperforming consumer staples. The opposite foretold an impending decline in September of 2018. Should we follow the signal as the pendulum swings?
Summary
Consumer Staples / Consumer Discretionary Ratio
Consumer discretionary stocks should outperform its defensive cousin, consumer staples when institutions and investors position for an improving economy. While this is only one “input” that we utilize, we followed the logical conclusion in September to protect our gains very successfully.
It only makes sense that the cycle higher can last longer than most anticipate, so we will follow until the cycle changes.
Market timers should also watch Junk Bonds (JNK), High Yield Corporate Bonds (HYG), Small Cap Stocks (IWM), and Biotech Stocks (IBB/XBI). Bonds will signal first!
Additional Considerations:
- Don’t Fight the FED. The FED is accommodative
- Inflation is low
- Corporate balance sheets are strong
- Stocks are historically not expensive (PE = 17 +/-)
For now, the bullish cycle still prevails, barring any catalyst introduced in the interim.
Consumer Discretionary Stocks Worth Considering
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Happy Trading,
Vinny
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*** Stocks highlighted are for information purposes only and should not be considered as advice to purchase or to sell mentioned securities.
As always, the use of technical and fundamental analysis is encouraged in order to fine tune entry and exit points to average seasonal trends.
These mentions are stocks that we may or may not decide to trade as outlined in the watchlist. Always use a stop.