Consumer discretionary actions are the most sensitive to the market cycle and, at this time, give no indication that the cycle is about to change, according to one of the most watched technical analysts on Wall Street.
“The discretionary name is deteriorating historically before the end of the cycle,” Jeff deGraaf, founder and president of Renaissance Macro Research, said in a note Wednesday. “This makes them excellent prosecutors for the market cycle. With discretionary names at new relative highs, it suggests that the market cycle is still in the middle, even earlier, but not in the last hints of inflation and growth, ”
He pointed to the charts below, following the direct and relative performance of the discretionary sector of the consumer Russell 3000 with equal weight, to emphasize.
Renaissance macro research
The shares had a mixed performance on Wednesday, with Dow Jones Industrial Average DJIA,
up 90 points, or 0.3%, while the S&P 500 SPX,
decreased by 0.3% and Nasdaq Composite COMP technology,
decreased by 1.1%. Shares faltered last week as fears of rising inflation triggered a rise in bond yields. But if discretionary stocks are a guide, there is little evidence of price pressures so far.
“We could be wrong, but the discretionary name could weaken as we see a sustained rise in inflationary pressure, and the costs of consumer and energy borrowing erode purchasing power (this is not happening yet),” deGraaf wrote.