5 months ago • 1:10 min
This year has seen investors flock to recession-resistant consumer staples (purple line) and steer clear of growth-dependent consumer discretionaries (orange line): they’re up 2% and down 18% respectively. The extent of the divergence shows investors might be even more worried about the economy than the 12% drop in S&P 500 (blue line) suggests, but it also reveals a chance to profit.
Let’s say you’d rotated from discretionaries into staples at the start of the year: you’d have kept your exposure to stocks, but avoided a 12% loss. Or if you wanted to play offense, you might’ve bought consumer staples and shorted the S&P 500 (or even exclusively shorted discretionaries, if your broker let you). In that case, you’d have pocketed the full 14% difference in performance between staples and the
US consumers are already struggling to deal with eye-watering inflation. Soaring housing costs are the last thing they need.
A question from Finimizer Nicolas in Singapore
Here is a summary of the biggest events we were watching this week