Consumer Discretionary Sector And Corporate Bonds On Verge Of Sell-Off

I have been warning of a peak in the markets and a continued capital shift in the global economy that continued to push the Nasdaq and Dow towards new all-time highs while the foundations of the global markets continued to weaken.

I authored dozens of research posts regarding this phenomenon over the past 90+ days. Yet the clearest signs of this event may already be present in these Consumer Discretionary Sector and Corporate Bonds charts.

Consumers drive economic activity and corporate debt is often a measure of sustainable debt function within a functioning economy. When consumers tighten their belts and exit the economy in some form and Corporate debt is viewed as “more toxic” than “opportunistic” – something has changed in the global economy where a portion of the active consumer engagement of that economy is waning or has already left the building.

One of the biggest reasons economic contractions happen is because consumers exit the marketplace as a form of protectionism. Much like in 2008-09, when the credit crisis started hitting, many consumers were in shock and simply exited the marketplace completely. They didn’t buy big-ticket items. They didn’t go on trips. They didn’t do much of anything other than try to pay their bills and to protect what they had. I call this the “toilet paper and toothpaste mode”.Consumers typically buy only what is needed at times like this and try to save as much as they can.


If the Consumer Discretionary sector breaks below the $118 level and continues lower, it would be a very clear sign that the lower price channel has been broken and that new downward pricing pressures are taking place in the global markets. The bigger picture is that a breakdown in consumer confidence could take place – much like a self-fulfilling event. When the consumer market begins to tighten, more fragile consumers (those without extra money to spend) begin to tighten their spending and begin to default on loans/credit cards.

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