High frequency economic releases have generally been coming in a bit on the soft side, but the signs point to a cautiously optimistic outlook for the American consumer. First, there is the improving employment picture. As well, falling gasoline prices should also provide a boost to consumer spending.
As a result, a number of analysts have been bullish on consumer spending. New Deal democrat got somewhat excited over the tick up in Gallup`s rolling poll.
As well, Doug Short has indicated that the recent disappointing retail sales figures may be attributable to winter weather. The Atlanta Fed has also suggested that we are seeing a bout of seasonal softness in the Q1 growth statistics.
Mr. Market doesn't seem to be buying into the consumer revival theme. Here is a chart of the relative performance of consumer discretionary stocks (via Consumer Discretionary Select Sector SPDR (ARCA:XLY)) against the SPX (via the SPDR S&P 500 ETF (ARCA:SPY)), along with a number of key consumer spending related industries (via the SPDR S&P Retail ETF (NYSE:XRT), Market Vectors Retail ETF (NYSE:RTH), PowerShares Dynamic Leisure & Entertainment ETF (NYSE:PEJ), PowerShares Dynamic Media ETF (NYSE:PBS), SPDR S&P Homebuilders ETF (NYSE:XHB)). In all cases, relative performance seems to be rolling over and I see broken relative uptrends everywhere.
There is a disconnect here between macro and technical market expectations. Someone is going to be proven very wrong.
Disclosure: Cam Hui is a portfolio manager at Qwest Investment Fund Management Ltd. ("Qwest"). This article is prepared by Mr. Hui as an outside business activity. As such, Qwest does not review or approve materials presented herein. The opinions and any recommendations expressed in this blog are those of the author and do not reflect the opinions or recommendations of Qwest.
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