The multi-trillion dollar S&P 500 Consumer Discretionary sector comprises some of the largest and most influential companies in the U.S. It includes companies that provide goods and services to individuals for their personal use. Think auto, apparel, media, internet sophisticated, and certain retail and restaurant companies. This sector can be considered the engine of economic growth as it is largely responsible for driving consumer consumption and spending.
The importance of the S&P 500 Consumer Discretionary sector cannot be overstated. It is one of the most volatile and cyclical sectors, but due to its size, it also has an outsized influence on the stock market as a whole and can judge the performance of the broader U.S. economy. When times are good, thesector typically garners outsized returns as individuals are flush with cash and willing to buy the newest fashion trend or luxury item.
At the moment, however, the S&P 500 Consumer Discretionary sector holds the key to how the broad stock market fares. With the Coronavirus pandemic still in its infancy, the sector has already been hit hard by mandatory stay-at-home and social distancing measures. Companies that are not accustomed to operating via online platforms like Amazon and Netflix are suddenly scrambling to figure out how to move their businesses online or how to minimize losses.
The reaction of the S&P 500 Consumer Discretionary sector over the coming weeks and months will be telling. An extended period of weak performance from this sector could result in investors pulling back from the broader stock market and sending it into a tailspin. On the other hand, a rebound in the sector could bring some hope in the midst of a difficult economic outlook.
It is clear from the current economic situation, the performance of this sector will have a significant role in how the S&P 500 fares in the months ahead. Investors are closely watching the performance of the sector and may even be waiting to see how it bounces back before proceeding. For the S&P 500 Consumer Discretionary sector, now more than ever, holds the key to the market’s success.