XLP:XLY Consumer Staples/Consumer Discretionary Ratio Weekly Chart

The XLP:XLY ratio can help gauge the mood of society. If you recall fractions from high school math class, you remember the numerator is the top number (XLP) in a fraction, or ratio, and the denominator is the bottom number (XLY). When XLP goes up it pulls the ratio higher. When XLY goes up, it pulls the ratio lower. When XLP goes down, it pushes the ratio down. When the XLY drops, the XLP:XLY ratio moves higher.

XLP is consumer staples such as toilet paper, soap, paper towels, hygiene products, cases of water, food, the necessities and bare essentials in life. XLY is consumer discretionary which is the mad money spending the custom made billiards table, skidoo, boat, motorcycle, vacations, designer clothes, diamond jewelry (although the ladies say this is a staple) and other fun stuff.

When the pandemic hit in early 2020, people panicked picking store shelves clean hoarding toilet paper for their fat *sses. Folks saw the elderly dropping like flies from COVID-19 so the worry increased with folks not thinking about buying that boat anymore. The vacation to Cancun is out the window. Instead, the pantry was stocked with canned goods and water. At the store, three of each item are purchased instead of the usual one. Consumer staples go through the roof in early 2020 while discretionary sinks like a rock like Keystone's jokes at the stand-up comic open-stage night.

But what is that sound? It is the cavalry. The Federal Reserve continues printing money like madmen tossing it from helicopters to the people below. The politicians, both the dirtbag republicans and dirtbag democrats, pass trillions in spending bills passing out checks in 2020 to anyone that can fog a mirror. People are happy with all the stimulus eating Porterhouse steaks every night and buying that boat after all. Why not? The government is shelling out money so no need to worry (moral hazard). The green circle occurs as Americans go on a spending orgy so obscene it would make Caligula blush.

As the back half of 2020 and 2021 play out, folks feel foolish looking at all those canned goods in the pantry and there are so many paper towels they had to be stored in the shed out back. Forget that. It was time to spend like drunken sailors and no one cared about staples anymore. It was time to par-tay on Uncle Sam's dime. Yee-haw. Free money (although it ain't free) is falling from the sky. Government checks are greasing palms and some folks say they do not feel like ever going back to work again. SRV said if the house is a rockin', don't bother knockn', come on in. There's some bad honky-tonker's really laying it down.

As 2022 started, the party waned, like the covid vaccines, and the United States was engulfed in the worst infection wave of the entire pandemic, wave 6, the BA1 Omicron Variant that originated in Zimbabwe and then was discovered at the Botswana/South Africa border. Americans panic again wishing they did not buy that baby grand piano for the living room or the matching snowmobiles and trailers. Instead, they run to the stores again to stock up on food, detergent, soap, hygiene products and of course more toilet paper.

The 3 moods correspond to the cyclical behavior of the stock market with stocks down and out at the start of 2020 due to the pandemic collapse; call it a cyclical bear market period. Then Fed Chairman Powell, President Biden and the Congress all sang from the same hymn sheet promising easy money forever, tossing out Benjamin's into the adoring crowds. This was the cyclical bull market in late 2020 and 2021.

Then, as this year started, 2022, the mood sours again with inflation, the Ukraine War that started late February, the pandemic, the lingering Afghanistan withdraw embarrassment and worries about Biden's mental capabilities and misguided climate change agenda, all conspire creating a cyclical bear market that remains in play currently.

Note that the trend is up for the last 3 weeks (more staples less discretionary; more fear and worry instead of complacent partying). Thus, you are out there stocking up on canned goods and toilet paper again and at the same time nixing the trip to Florida and are no longer going to buy that mink coat, right? This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.