1.Staples vs. Discretionary - Rotation or Overshoot?
Staples are enjoying great momentum, but relative valuation is now ahead of macro
Consumer Staples are enjoying a great start to the new year benefitting from a defensive bid, the AI-immune narrative, plus great momentum on the charts.
There is, however, evidence that things may have run too far too fast. Using equally weighted ETFs, Consumer Staples now screen as 1.2 sigma (5.7%) rich to Consumer Discretionary.
Qi’s model confirms Staples defensive properties - weaker growth/inflation, wider credit spreads, risk off all equate to RSPS outperformance – and macro momentum is supportive. The issue isn’t direction; it’s distance with price having outrun model value.
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