The S&P 500 is having a great year. Consumer discretionary stocks are not invited to the party.
The ratio between the S&P 500 Consumer Discretionary sector and the broader index has sunk to its lowest level in 20 years, a striking divergence that reveals just how lopsided this market rally has become. While the S&P 500 recently crossed 6,600 for the first time, marking a 36% surge from its April 2025 low, traditional consumer-facing stocks have been left treading water, or worse.
What’s dragging consumer stocks down
The culprits are familiar and compounding. Persistent inflation, elevated interest rates, tariff policy adjustments, and a meaningful pullback in spending among lower-income households have all conspired to weigh on the sector.
The Consumer Discretionary Select Sector SPDR ETF, known by its ticker XLY, has posted roughly a 10% trailing one-year return by mid-May 2026. That sounds acceptable in isolation. But context matters. The S&P 500’s 36% rip from its April 2025 trough makes that 10% look like a participation trophy.
