Are consumer discretionary stocks a harbinger of gloom or a buying opportunity?

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The highest inflation in three decades has affected equity markets negatively, but consumer discretionary companies have been among the hardest hit

All three are competitors offering largely the same products, but Target and Costco have seen their share prices fall about 28 per cent and 17 per cent, respectively this year compared with about 11 per cent for Walmart.is another diversified retailer in discretionary – though mostly in e-commerce – and its share price has fallen by more 31 per cent since the start of the year.

“Walmart also has a much larger mix of food [in its sales] than Target does,” but both companies’ revenue should hold up better in this climate because they sell goods people need, he adds.In turn, advisors and clients may be asking whether the recent rout presents a buying opportunity.The time is likely not now, he adds, noting discretionary – especially retail – often outperform in the recovery part of an economic cycle.

Still, money managers aren’t entirely shunning the sector. They’re more selective, investing in names likely to remain profitable in adverse conditions.in its Canadian equity portfolio, Mr. Ryall says. Listed among Canada’s few consumer discretionary companies, its share price is down about 6 per cent this year.

 

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