Consumer Staples/Discretionary Spending As A Reliable And Profitable Stock Market Timer

Oct. 08, 2021 5:09 PM ETIEF, SPY7 Comments
Georg Vrba profile picture
Georg Vrba


  • The differential return of the Consumer Staples and the Consumer Discretionary sectors can provide risk-on and risk-off signals for equity investment.
  • Four time series sets are used: ETFs XLP & XLY, Portfolio 123 Specialty SP1500 Consumer Staples & Consumer Discretion, Aggregate Series Non-Cyclical & Cyclicals, and ETFs RHS & RCD.
  • Investment in equities is signaled when the 15-week return of the discretionary sector outperforms the staples sector’s return.
  • From 5/1/1999 to 10/1/2021 this strategy, when accordingly switching between ETF SPY and ETF IEF, would have produced a 14.9% annualized return with a maximum drawdown of -17%.

Man at the shopping

Jelena Danilovic/iStock via Getty Images

Consumer spending contributes about 70% of the total United States production. Thus it is important to assess consumer sentiment, which can be measured by the relative performance of the Consumer Non-Cyclicals sector stocks and Consumer Cyclical sector

This article was written by

Georg Vrba profile picture
Georg Vrba is a professional engineer who has been a consulting engineer for many years. In his opinion, mathematical models provide better guidance to market direction than financial "experts." He has developed financial models for the stock market, the bond market, yield curve, gold, silver and recession prediction, most of which are updated weekly at

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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