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Why Can’t This Economically Sensitive Sector Kick Into Gear?

CAMS Weekly View from the Corner – Week ending 8/6/21

August 9, 2021

We feel compelled to share that choosing points of interest for these editions of late has been challenging.  There are times when the general economic and market landscape is so smooth and quiet that we struggle for something of meaning to offer.  These are certainly not those times.  Rather, we struggle in choosing from the many potential topics while asking what might be most meaningful to our audience of readers.  Meaningful, that is, in the sense of what may or is not being shared in the general information trail offered from the plethora of outlets. With this today we are delving back into a topic we shared just a month ago.  The reason for this choice is to us it ranks high on the “this is strange” list of market and societal economic behaviors.  A list, by-the-way, that is rather long. Framework Thoughts and Questions Realizing the citizenry has experienced a wealth of free money programs distributed from various government entities in conjunction with an employment market that offers a wealth of employment opportunities it seems fair to offer, as a general statement, the citizenry has deployable dollars at their disposal.  (This is supported by data but for this edition we will stay out of those details.) On an inter-connected basis, why do market participants, with their forward focused view, and the citizenry’s consumers with their current day consumption behavior coupled with their forward expectation of consumption via economic confidence view seem to be disconnected?  Say what? Consumer Confidence survey’s offer we have rebounded tremendously in overall Confidence.  In addition, in the Labor Market area of said Confidence measures, the “Jobs plentiful” area has exceeded previous highs. Taken together and coupling with the aforementioned free dollars fanned about there seems to be plenty of consumer firepower to lend confidence to market participant’s collective view that the Consumer is strong, is willing to spend and will remain strong.  All of the above offered differently and succinctly:  Why do market participants feel that consumers, down the timeline, will not be so confident about spending their income and savings on discretionary purchases? Do market participants know or suspect a different experience down the road than what general consumers are thinking they will see?

Click For Larger View:

The above chart represents the diverse sector for Consumer Discretionary industries.  This is one of the most economically sensitive areas within the broad stock market landscape.  If interested, this link gives a full list of its component industries: This is the same chart we shared a month ago.  By design we have not amended the red line annotation from that edition.  We can see what transpired after that piece back in early July as it displayed yet another notable dip and then an ensuing upturn to get back in range.  To current day – still no trend in sight. This pricing behavior dates back to the beginning of April.  We share this to emphasize this is not some type of recent message whereby participants perhaps are concerned of a fall season Covid shutdown.  This has been their pricing message through spring and now the summer season.  (Months of the year we might add that are seasonally favorable to many of the component industries.) Furthermore, this past Friday’s employment report was quite large and exceeded expectations by nearly a hundred thousand jobs.  In addition, some of the largest employment gains came from industries within the above sector.  And for all of this, collective market participant’s reaction for this economically sensitive area:  Continued no trend and actually negative on the day by Friday’s close. Perhaps this can break upward and trend any day now.  We have been waiting for months now as we have been watching closely with a momma bird focus if you will. Speaking to Friday’s employment report the bond market did chirp up on a yield basis.  This has been a focus of ours in recent editions.  The question is will those yields be able to trend upward and if they can will we get some life out of the above economically sensitive area?  Both questions need some trading time to answer.    This we do know:  Behaviors such as these do not speak to a strong and vibrant overall market landscape.  This does not mean the market will have serious issues any day now but rather suggests there is a wealth of uncertainty strewn throughout the market structure.  The question we are focused on now is with the large employment report on Friday can we see the market structure broaden out including the above economically sensitive sector. This should happen and if it does not it will further attest to collective participant’s caution of the forward economic outlook.  We will share the market and inter-market developments accordingly. I wish you well…

Ken Reinhart

Director, Market Research & Portfolio Analysis


H&UP’s is a quick summation of a rating system for SPX9 (abbreviation encompassing 9 Sectors of the S&P 500 with 107 sub-groups within those 9 sectors) that quickly references the percentage that is deemed healthy and higher (H&UP). This comes from the proprietary “V-NN” ranking system that is composed of 4 ratings which are “V-H-N-or NN”. A “V” or an “H” is a positive or constructive rank for said sector or sub-group within the sectors.

This commentary is presented only to provide perspectives on investment strategies and opportunities. The material contains opinions of the author, which are subject to markets change without notice. Statements concerning financial market trends are based on current market conditions which fluctuate. References to specific securities and issuers are for descriptive purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. There is no guarantee that any investment strategy will work under all market conditions. Each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market. PERFORMANCE IS NOT GUARANTEED AND LOSSES CAN OCCUR WITH ANY INVESTMENT STRATEGY.

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