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Consumer Discretionary Sector Rating: Marketperform

Fundamentally, the state of the American consumer remains healthy—unemployment is near historical lows, wages have risen modestly, consumer confidence remains relatively high and interest rates have fallen this year, which makes borrowing cheaper.

However, the business cycle—which traditionally rotates through early/mid/late stages, then recession, before starting the cycle over again—appears to be in the late stages. Historically, this has been a relatively weak point in the business cycle for the Consumer Discretionary sector, which tends to outperform in the early stage.

Also, new U.S. tariffs scheduled to take effect on Chinese goods later this year will have a greater effect on consumer goods than previous tariffs did, which may increase consumer prices, in turn hurting sales and pressuring profit margins within the Consumer Discretionary sector.

Meanwhile, the spending mix is shifting, with online sales growing much faster than traditional department store sales,¹ while consumers also have shifted their spending habits relative to what they were before the Great Recession. In addition, price competition has created a tough environment for many retailers, paring weaker performers from an overcrowded space.                                      

Overall, the American consumer’s mood is optimistic, but we’re on guard for a potential softening of that mood if business leaders’ cutbacks on capital spending broaden into cutbacks on labor. Some recent purchasing managers’ index (PMI) data have shown some labor market deterioration within the services sector, following what had been weakness concentrated in manufacturing. This is an important factor to watch to see if a trend develops. For now, we maintain our marketperform rating.


¹ Source: U.S. Department of Commerce, Quarterly Retail E-Commerce Sales, 2nd Quarter 2019, reported 8/19/2019.

    What do the ratings mean?

    The sectors we analyze are from the widely recognized Global Industry Classification Standard (GICS®) groupings. After a review of risks and opportunities, we give each stock sector one of the following ratings:

    • Outperform: likely to perform better than the broader stock market*
    • Underperform: likely to perform worse than the broader stock market
    • Marketperform: likely to track the broader stock market


    Want to learn more about a specific sector?  Click on a link below for more information or visit Schwab Sector Views to see how they compare. Clients can log in to see our top-rated stocks in the Consumer Discretionary sector.


    * As represented by the S&P 500 index

    Communication Services Industrials
    Consumer Staples Information Technology
    Energy Materials
    Financials Real Estate
    Health Care Utilities


    What You Can Do Next

    Communication Services Sector Rating: Underperform
    Consumer Staples Sector Rating: Marketperform

    Important Disclosures

    Schwab Sector Views do not represent a personalized recommendation of a particular investment strategy to you. You should not buy or sell an investment without first considering whether it is appropriate for you and your portfolio. Additionally, you should review and consider any recent market news. Supporting documentation for any claims or statistical information is available upon request.

    All expressions of opinion are subject to change without notice in reaction to shifting market or other conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.

    Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly. For more information on indexes please see

    Past performance is no guarantee of future results and the opinions presented cannot be viewed as an indicator of future performance.

    Investing involves risk including loss of principal.

    The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc.


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