Crude oil’s 10%+ jump today had a negative impact on consumer-related areas of the equity market.  Given the concern that higher oil prices will be a drag on global activity, the RTH Retail ETF fell more than 1.3% on a day when the S&P 500 was down just 30 basis points.  Below is a historical chart of the ratio between RTH and the oil commodity ETF — USO.  When the line is rising, the retail sector is outperforming oil, and vice versa for a falling line.  This ratio has been trending higher throughout the decade, and it just recently hit a new high.  But today that ratio fell out of bed as USO jumped and RTH fell.  In fact, the steep drop in the ratio is the largest one day decline on record going back to 2011 when RTH first began trading.  Similarly, with RTH down over 1.25%, USO is also outperforming in terms of percentage gain by the widest margin ever.

By that same vein, the ratio between retail and the energy sector (XLE) has also seen its largest single-day decline to date.  Ironically, this is after the line went nearly vertical following retails’ massive run in August (around the time of earnings for these companies). This ratio has now pretty much given up that entire move upwards.

Even taking a broader scope, comparing the entire consumer discretionary sector to the energy sector, this ratio has also seen its largest single-day decline ever. But even though oil and energy are drastically outpacing other assets today, for most of the past several years that has not been the case.

It has been more than a decade since oil and the energy sector were long-term market leaders.  Only time will tell if today’s huge drop in these ratios from record levels is the start of another extended period of outperformance for Energy.  Start a two-week free trial to Bespoke Institutional to access our Security Analysis tool, Trend Analyzer, and much more.

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