We are in the month of August and traders are preparing to put on the trades for the end of the year.
The current earnings season is starting to shape a pretty clear picture of what we need to expect for the next 3-6 months.
The main takeaway is that the consumer sentiment is in decline, consumers do not spend as much as in the previous months. We can look at Amazon earnings if we want a clear coincidence indicator.
But why consumers are not that excited to spend more?
Inflation?
No more stimulus from the government?
Like always it’s a combination of factors, but to be honest I do not really care what specific factor caused a specific metric.
What I care about is if we have or do not have a clear picture of what the next months are likely to look like. The picture is starting to look pretty clear.
Let’s look at some metrics
Consumer sentiment (leading indicator) - is slowing and also it’s not forecasted to improve in the coming months.
Retail sale (coincident indicator) - confirms that the spending is slowing.
Durable goods orders (coincident indicator) - shows that the durable goods are basically in the same range. Nothing special here. I put the chart here to have some perspective between retail sales and durable goods.
We have here the US Sectors performance in the last 3 months and 1 month.
Consumer Discretionary sector it’s already underperforming other sectors.
Also, we can observe the Utilities and Financials sectors gaining some uptrend momentum.
Conclusion
My personal expectation for the next 3-6 months.
The worst performing sectors/industries:
Homebuilders
Consumer discretionary. I will exclude the Textile-Apparel industry from the Consumer discretionary for the moment. It seems that the Textile-Apparel industry has a good uptrend momentum going.
The best performing sectors/industries:
Utilities
Consumer staples
It looks to me that we have a clear rotation for the end of the year.
Until new data, this is my position about US Sectors.
Be well.