Someone Please Explain This…

15 Jul

So I mostly follow individual stocks in the consumer discretionary space so every now and then I take a look at the bigger. This time (as I’ve noticed seems to be a trend), I’m confused. While the S&P500 is down 27% over the past 3 years, the S&P consumer discretionary index is down only 21% and the retail index is only down 13% (the latter was actually higher than 3 years back a few short months ago!).

I don’t get it. Help?

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5 Responses to “Someone Please Explain This…”

  1. eradke July 18, 2010 at 12:46 pm #

    Because they are made up of different companies and re balancing has probably occurred. Similar to every rectangle(sector) is a square (S&P500) but not all squares are rectangles. Here is a good website that aggregates performance http://www.sectorspdr.com/sectortracker/

    • Anal_yst July 19, 2010 at 6:34 pm #

      I should have clarified but I posted that from my blackberry so bear with me. I’m not asking so much about the divergent relative performance of XLY and XRT but of each of them independently from the S&P500 (“The Market”). TO clarify further, how the hell is retail doing so well???

  2. Hondo the bondo July 19, 2010 at 10:04 pm #

    Anal_yst, I think Bloomberg columnist Caroline Baum hit on one reason back in April. All that extra cash from not paying the mortgage is being spent in retail — not at Coach or Tiffany, mind you, but probably moving the needle on overall retail spend and making retail stocks “less worse” than financials and the overall market.

    Link to article:
    http://www.bloomberg.com/news/2010-04-22/honey-i-lost-the-house-now-it-s-time-to-party-caroline-baum.html

    • Anal_yst July 21, 2010 at 6:45 pm #

      I’ve seen that explanation several places before but I haven’t seen anyone actually show the data to back up the claim, real data, not anecdotal evidence, not speculation, not “what experts are saying,” real data.

  3. chessNwine July 22, 2010 at 3:08 am #

    To take it a a step further, the XRT bottomed in November 2008, whereas we all know the S&P didn’t bottom until March 2009. I am primarily a chartist, but my best answer as to why retail is outperforming is because of the growing consumer base in emerging market economies.

    Beyond that, because of the different monetary policies that we are seeing today versus in the 1930’s, the classic expectation of deflation crushing both prices and demand in a vicious downward spiral is not at the forefront so much as the overarching theme of deleveraging within the context of easy monetary policy.

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