Morgan Stanley’s Wilson Sees Risks Rising for US Consumer Stocks

Consumer stocks, one of the brightest corners of the market this year, are about to lose their shine as risks build for the sector, according to Morgan Stanley’s Michael Wilson.

The faltering rally is in keeping with the view of Morgan Stanley economists that household spending probably can’t sustain the surprisingly strength of the first three quarters, the strategist said.

Assigning an equal weighting to members of the consumer discretionary sector shows performance is breaking down, while 44% of stocks trading below their 200-day moving average also points to weakness, Wilson wrote in a note.

“This price action is picking up on slowing consumer spend, student loan payments resuming, rising delinquencies in certain household cohorts, higher gas prices and weakening data in the housing sector,” he said.

Consumer Stocks Outperformed Benchmark this year