The Key Drivers of Consumption Continue to Support Strength in Consumer Stocks

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In our last blog post I highlighted the significant outperformance of the consumer discretionary sector versus the S&P 500 over the last 2 decades. In fact, since the S&P indices were created in late 1989, both the consumer discretionary & consumer staples sectors significantly outperformed the market. This should NOT be surprising given how important the spending theme is to our economy. The big disconnect: most portfolios are woefully underweight the consumer spending beneficiaries. That’s a major opportunity for investors & allocators. There’s still strong evidence to suggest the spending winners, aka the leading Brands serving the consumer should continue their winning ways.

Source: Bloomberg & Accuvest

What drives consumer spending? Hedgeye Research simplifies it here:

A downside in the savings rate coupled with rising prospects for accelerating wage growth and lower inflation (income ↑ + inflation ↓ = real income/purchasing power up) should continue to provide some measure of support to household consumption capacity.

Consumer & Small Business Confidence is High – supports spending, hiring.

Wages: Rising – supports continued spending

Inflation Peaking: supports businesses that have pushed price increases through as well as further consumer spending

DISCLOSURE:

This information was produced by and the opinions expressed are those of Accuvest as of the date of writing and are subject to change. Any research is based on Accuvest proprietary research and analysis of global markets and investing. The information and/or analysis presented have been compiled or arrived at from sources believed to be reliable, however Accuvest does not make any representation as their accuracy or completeness and does not accept liability for any loss arising from the use hereof. Some internally generated information may be considered theoretical in nature and is subject to inherent limitations associated therein. There are no material changes to the conditions, objectives or investment strategies of the model portfolios for the period portrayed. Any sectors or allocations referenced may or may not be represented in portfolios of clients of Accuvest, and do not represent all of the securities purchased, sold or recommended for client accounts.

Eric Clark, Portfolio Manager
Eric serves as a Portfolio Manager and a member of the Investment Committee at Accuvest Global Advisors. His focus is on Accuvest’s suite of Dynamic Brands equity strategies. As a member of the Investment Committee, his responsibilities include research, investment analysis, technical analysis, macroeconomic commentary, and portfolio strategy & implementation. Eric also leads the sales, marketing & distribution efforts of the Dynamic Brands business line. Eric has 25 years investment experience. Eric is a frequent writer about the power of the consumer spending theme and global consumption trends. He is a brand consultant and leads the Alpha Brands Consumer Spending Index committee. He holds the Series 7 and 66 licenses.
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