ASX 200 Consumer Discretionary & Staples Sectors

The Australian consumer is struggling and it’s been reflected in the discretionary names, which again weighed on the ASX on Thursday:

• The Consumer Discretionary sector has fallen 10% YTD with all 8 members down, from Premier Investment (-5%) to Nick Scali (-47%) – the more exposed to property and big-ticket items, the tougher it’s been, with Harvey Norman (-42%) also vying for the wooden spoon.
• Conversely, the Consumer Staples sector managed to gain +15% YTD, aided by a defensive bid because, as they say, people might not need a new couch, but they do have to eat! A relatively small sector, but it’s witnessed huge performance dispersion from Woolworths (+34%) to Endeavour Group (-11%) as people reduce drinking.

The question we ask today is, do we want to increase/reduce exposure to either, and if so where? The chart below doesn’t trigger any bullish look or feel, with the consumer staples sector having traded sideways for years while the discretionary names are experiencing a very tough year with no clear end in sight. However, as we showed above, not all stocks within these sectors have moved as one.

• We do feel the consumer discretionary sector is in the eye of a negativity storm, but it could easily have further to unfold.