Indeed, the discretionary ETF has been leading the staples sector since the beginning of August. [Consumer Discretionary ETF Rises to All-Time High]
Since Aug. 1 the discretionary fund XLY has risen 5.7% in price, while XLP is flat.
“During up trends and periods of an expanding economy we normally see discretionary stocks outperform staples as consumers have more flexibility in their spending,” Thrasher notes. “The opposite is often true when the economy begins to falter, investors shift back into consumer staples as shoppers spend more of their paychecks at the grocery store and less at Amazon.com or Starbucks.”
The XLY/XLP ratio is nearing the 2012 high. “We’ll see if it breaks past this level or if XLP can begin to gain ground and start outpacing XLY, giving us a potential sign that traders are starting to take risk off the table,” the analyst said.
