Introducing 'Market Munchies' with Michel Villa
- Michel Villa
- May 27, 2024
- 2 min read
As mentioned in our previous post, today marks the day of Michel Villa’s first publication as our newest contributor at WealthUmbrella!
Michel Villa – Stock Market Trainer
Michel has over 10 years of experience as an equity arbitrage trader in Montreal (at the pension funds of Hydro-Québec, Canadian National, Scotia Bank, and Laurentian Bank) and holds several recognized professional finance certifications, such as CPA-CGA and CFA (Chartered Financial Analyst). Passionate about the stock markets and human behavior, he offers an original approach based on his personal experience, anecdotes, theory, and practical examples. For more details, please visit his website at michelvilla.com.
As our guest writer, Michel will be sharing his valuable perspectives on the market in concise, timely posts.
Happy reading, and as always, feel free to ask questions or leave comments.
-Nathalie
Discretionary Sector Underperformance: Sign of a Looming Economic Slowdown?
by Michel Villa,
With the S&P 500 trading less than 1% from a historic high and the VIX index (the S&P 500's volatility index) below 12, it's clear that market participants are feeling rather complacent.
From a technical analysis standpoint, although a confluence of different and complementary signals is preferable for adopting a more defensive posture, it's interesting to note that the relative underperformance of the discretionary spending sector compared to the S&P 500 is at its lowest level in the past decade.
As a reminder, stocks in the discretionary consumer sector are particularly sensitive to economic cycles. Discretionary consumer goods and services include products like cars, leisure activities, and luxury items, which are not essential. During periods of economic expansion, consumers have more disposable income and are therefore more inclined to spend on these products.
It will be interesting to follow the evolution of this sector to determine if this relative underperformance suggests a possible slowdown in economic growth in the United States, and consequently, a less prosperous period in terms of returns for the S&P 500.