A chart caught our eye from Goldman’s Noah Weisberger — Goldman’s basket of consumer stocks, the ‘Wavefront US Consumer Growth Basket’ appears to have fallen behind the sharp rebound in U.S. consumer data as of late.
However, as we look at how consumer bits of the US equity market stack up against the economic data, it still seems that the market response has been quite restrained (see Exhibit 2 and 3). And even though we see the near term risks as about balanced, we still see plenty of “macro” value in consumer stocks, be it via our Wavefront Basket, via the broader consumer discretionary sector (say the XLY), or even via some more narrowly focused retail baskets (like the RTH, with the MVRX the clear exception to this). Moreover, we continue to have a fairly constructive outlook in terms of the near-term balance between better growth news, still moderating US inflation, and the resulting monetary policy response (or lack of one).
For those without access to Goldman’s basket, the Consumer Discretionary Select Sector SPDR (XLY) ETF, mentioned in the excerpt above, might be a proxy. Another idea is to look at strong consumer-driven companies that may have underperformed the overall market, such as Best Buy or Walmart. If Goldman’s Consumer basket rises with the rebound in consumer data shown above, most consumer names will probably be rising as well.
(Via Goldman Sachs, Tradewinds: Flat tactical equity risk, Noah Weisberger, 20 April 2010)
Note: The author does not personally own Walmart (WMT), Best Buy (BBY), or XLY shares, but investors he speaks with may. Everyone should perform their own complete due diligence with any stock mentioned.
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