National Post (National Edition)
RBC STRATEGIST CUTS OUTLOOK ON CONSUMER DISCRETIONARY SECTOR
Consumer discretionary stocks have been the bestperforming group in the U.S. since the market bottomed in March 2009 with a price return of more than 420%.
But Jonathan Golub, chief U.S. market strategist at RBC Capital Markets, on Monday downgraded the sector even though he remains positive on the broader market and the economic backdrop.
Mr. Golub moved his recommendation to neutral, pointing out that his previous overweight rating was based on a strong outlook for durables, media and luxury goods, coupled with a weaker forecast for retail, restaurants and apparel.
“The median consumer remains under pressure, a headwind for restaurants, retail and apparel,” the strat- egist told clients, noting that same-store-sales forecasts for the second half of 2014 are below 3% despite an expected improvement in GDP.
“Higher-end consumers have fared better,” he added, noting that only the top fifth of households have grown their real income since 2008.
Mr. Golub has also become more cautious on durable goods, as the healthy rebound in new vehicle purchases indicates less upside going forward.
Meanwhile, housing has come under pressure and is expected to stay that way as interest rates rise.
And while growth in media is still a standout in the sector, the strategist cautioned it should also moderate from higher-than-average levels.