Deeply Unloved — But Is That Enough?
While much of the recent market conversation has focused on the rotation into Cyclicals, one sector has notably failed to participate: Consumer Discretionary.
It has been one of the weakest performers across both US and European sectors in recent months and indeed years. And that underperformance has been accompanied — and reinforced — by increasingly bearish sentiment across our indicators.
The key question is not whether the sector is unpopular.
It is whether sentiment has become sufficiently depressed to shift the risk/reward balance.
As always, this is not a call to “buy” or “sell” Consumer Discretionary. It is a sentiment note. And sentiment analysis is best used to do two things:
- Identify when pessimism becomes sufficiently stretched that vulnerability shifts to the upside.
- Stress-test the prevailing narrative — where is consensus most confident, and what would force a rethink?
Sentiment & Positioning
We always start with the data.
Our Sentiment Matters Aggregate (SMA) for Consumer Discretionary has been below the 30th percentile for the past year and currently sits at the 9th percentile.
The last time sentiment was this depressed was during the 2022 recession scare. Before that, you have to go back to the Great Financial Crisis.
This isn’t a one-indicator story — it’s broad-based.
Across indicators:
- All 11 of our sentiment indicators sit below the 50th percentile.
- Long-term momentum is extremely weak across the board.
European Autos, Travel & Leisure and Consumer Discretionary sectors — as well as US Consumer Discretionary — all sit in the single-digit percentile of their own history.