During an “ETF Spotlight” segment on CNBC on Monday, Mike Santoli took a look at the sectors hit hardest by the current US-China trade war.

Consumer discretionary stocks are the main topic of conversation, as they’ve been outdoing industrials amid the trade war. Santoli explains consumer discretionary may be the strongest pull of economic activity in the world. Meanwhile, industrials are pressured more because of trade issues.

Santoli then points out a graph placing the SPDR Consumer Discretionary ETF (XLY) and the Industrial SPDR ETF (XLI), noting the outperformance being done by XLY. However, when looking at equal-weighted versions of these same sectors, the portfolios for the Industrial stocks have performed better.

With regards to why, Santoli explains, “Because if you look at the Consumer Discretionary ETF, the XLY traditional one, one-third of it is Amazon (AMZN) and Home Depot (NYSE: HD). So, the average consumer discretionary stock has not outperformed the average industrial stock.”

Noting this points out the circular challenges when it comes to retail, autos, and other aspects of consumer discretionary. More importantly, even when looking at an active part of the market, there is a relatively defensive tone at play, in anticipation of possible slowdown at the market, or consumer weakness.

Watch Santoli Explain Consumer Discretionary Stock Status

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