It’s been a tough year for the Consumer Discretionary sector as more conservative consumers and Amazon outweigh the positive impact of lower gas prices. The chart below shows the sector’s relative strength versus the S&P 500 over the last twelve months. In the chart, a rising line indicates that the sector is outperforming the S&P 500, while a falling line indicates underperformance. We have also included a red dot to show the last FOMC rate hike back in early December. As shown, the sector had seen a nice bounce towards the end of 2015, but in the days leading up to that hike, its relative strength peaked and has pretty much never recovered. Through today, the sector is underperforming the S&P 500 by close to its widest levels of the last year.
Times may be tough for the Consumer Discretionary sector, but the Technology sector is enjoying quite a revival. Since the end of April, the Technology sector has been the top performing sector, rallying 10.6% compared to a gain of just 1.8% for the S&P 500. The rally in the sector shows up in the relative strength chart below. Despite that spike higher, though, the Technology sector’s relative strength is still below the two prior peaks from early April and December just before the Fed hiked rates.