QI TAKEAWAY — Consumer Discretionary has been on a tear, fueled by aspirational buyers and those on the receiving end of the Fed’s trickle up policies. Taking some profits in the sector could prove prudent.
- Per Bank of America, the percentage change in inflation-adjusted grocery spending on a 2-year basis slipped further into contraction in October; while food inflation appears to be leveling off at high levels, per the CRB, higher prices are driving nominal gains in card spend
- On an inflation-adjusted basis, growth in goods spending reached a massive 40% last spring, while a third stimulus check helped boost services spending 20%; against the current pricing backdrop, UMich Real Household Income Expectations in 1-2 years are now at 5-year lows
- The aggregate of Current Inventories from the NY, PHL, and KC Fed’s manufacturing surveys, as a z-score, is just below a 20-year high; meanwhile, Current Prices Paid continue to push upward as demand pulled forward exacerbates ongoing supply chain challenges