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Staples Outperforming Discretionaries

|Includes: Consumer Staples Select Sector SPDR ETF (XLP), XLY

At the start of 2012, Discretionary stocks, as measured by the S&P500 Consumer Discretionary Index (SPCC) outperformed Staples, as measured by the S&P500 Consumer Staples Index (SPST). Curiously, since May, this relationship has reversed, with Staples outperforming Discretionaries. See the chart below.

The solid red line is the ratio of SPCC to SPST. Note the decline since May. It is interesting that this decline was accompanied by a decline in the price of crude (see the bottom of the chart), somewhat contrary to what one might expect.

This could signify an aging of the business cycle where more conservative equities tend to outperform. Although the "risk-on" trade seems to be the prevalent trade since early June, one might call this the "risk partially on" trade, noting the shift toward more defensive (and dividend-paying) equities.