Consumer Sector Stocks. Events in Crimea have little direct impact on the U.S. economy, but rising geopolitical risk undermines an already nervous consumer. In fact, it doesn’t help matters that the turmoil in Ukraine is occurring at the same time that U.S. consumer confidence is already weakening. While the economy is improving, consumer confidence remains fragile.
Weak consumer confidence is a key reason why retail spending remains lackluster and why retail sales are growing at the slowest pace since late 2009. As such, I would be concerned about consumer discretionary and consumer staples stocks, which are down year-to-date and are trailing the broader market, but are still expensive.
So what’s my outlook for what will happen in Ukraine? At this point, it appears likely that tension and turmoil will persist as a solution to the standoff in Crimea is eluding politicians. But while the situation in Ukraine is fast moving and highly fluid, the prospect of mounting tension is real.
Russ Koesterich, CFA, is the Chief Investment Strategist for BlackRock and iShares Chief Global Investment Strategist. He is a regular contributor to The Blog and you can find more of his posts here.
Source: Bloomberg, BlackRock research