Available Bias, US Consumer Industries and Homebuilders

The recent stock market actions in the US should serve as fundamental example of how the "available bias" plagues mainstream reporting.

The other day, as consumer confidence hit a 10-month low , the report apparently coincided with a fall in US stockmarkets. And media hastily promoted a causal effect: market actions had been driven by current news.

Chart from Northern Trust

Bespoke Invest, for the second day, has assiduously rebutted the issue and showed that the broadbased decline had consumer discretionary and consumer staples as the least affected sectors (see here)

In contrast, materials, finance and energy had been smacked the most.


Bespoke Invest extends the rejoinder by illustrating the outperformance of US retail stocks relative to the key benchmark the S&P 500 and called on today's advances as "new bull market high"

In addition Bespoke makes a dissection of the breadth and observes that consumer sectors have, not only outclassed the key index, but also all the other sectors.

They write, (bold highlights mine)

``Consumer Discretionary and Consumer Staples are currently trading the farthest above their 50-day moving averages of the ten sectors. The other two sectors currently above their 50-days are Industrials and Financials...We provide the year-to-date change, % from 50-DMA, dividend yield, P/E ratio, price to sales ratio, and price to book ratio for the various sectors. Across the board, we use red to green as the color code from lowest to highest, but obviously for ratios, the lower the better.

``While it used to have one of the highest yields, the Financial sector currently has the second lowest yield at 1.15%. It also has the highest P/E ratio at 66.44, but it has the lowest price to book at 1.14. Consumer Staples, Consumer Discretionary, and Telecom have the lowest price to sales ratios, while Technology has the highest. Technology also has the highest price to book."

Chart from Businessinsider

If the US consumer industry's outperformance is an indication of the upcoming real activities, even amidst a fall in commercial and industrial loans at commercial banks, this suggest to us that any lagged but positive response to the steep yield curve is likely to even bolster the recent retail activities [see previous discussion Changing Dynamics In Central Bank Management, Quasi Boom Policies]
Finally as we addressed earlier, homebuilder stocks seem to be laying foundations to another bubble cycle. Bloomberg's chart of the day notes that the industry group have also bested the market, according to Bloomberg,

``As the CHART OF THE DAY shows, the Standard & Poor’s 500 Homebuilding Index -- composed of D.R. Horton Inc., Lennar Corp. and Pulte Homes Inc. -- ended last week with a 21 percent gain for the year. The advance compares with a 0.5 percent loss for the S&P 500.

``Homebuilders were the year’s third-best performers among 134 industry groups in the S&P 500, according to data compiled by Bloomberg. The groups that did better each had one member: Eastman Kodak Co. for photo products and Harman International Industries Inc. for consumer electronics."

Well it would appear that market conditions have only been responding to "bubble policies" which is likely regenerate the same cyclical conditions: A boom today for a bust tomorrow.