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Investors weigh what's next for the market, searching for signals that the sell-off has either hit a bottom or has further to fall.
Marketgauge.com chief strategist Michele Schneider joins Morning Brief to explain her "vanity trade" strategy, and says the consumer sector is a "better barometer" for investors to monitor than mega-cap names like Nvidia (NVDA).
To watch more expert insights and analysis on the latest market action, check out more Morning Brief here.
Talk to me about being focused on value in this environment where we did see stocks moving to the upside for two days in a row. They're moving back to the downside today. Do investors still need to think defensively by looking at names and value or are we going to see more buying leading us back to gains? Is this going to be a rebound that has legs in your view?
Well, right now, I think if you really want to look at one thing to give you that determination, it has to be the consumer sector. And so we like to look at XRT because it's a very good combination of staples and discretionary. XRT got beat up to a pulp. Most recently, had a nice move up with the rest of the market yesterday, but it hasn't really done anything to wow. In other words, it's so far from major moving averages. It had a major breakdown on weekly moving averages. And so if we can see that get legs, I actually think that's a better barometer than say Nvidia. I mean, that could help, but I don't think growth is what this market is looking for at this point. They don't want to see it collapse. I think they need to see some confidence in the consumer area, transportation would be another and small caps. That represents the inside sectors of the US economy and people are looking to see if they actually can sustain and rally as a as a result of all of these administrative policies that have been set forth, not, you know, of course, being one and tariffs being another.
So I hear you saying consumer health is a better indicator of where the market is heading than the performance of Nvidia. How does that play into the trade? I know one trade idea that you sent over to us is the vanity trade. Talk to me about what names might be beneficiaries of consumer health, even when they're being choiceful in the retail space.
Well, this is a great example of things that have really fallen apart, but might be basing out. So if we just look at the diet drugs themselves, the two companies of course, Novo Nordisk and also Eli Lilly. Eli Lilly's doing better in terms of the technicals, but Novo Nordisk is another one not to ignore. It had sold off recently because it didn't do so well on a trial, but as much as people expected, but it has gotten some upgrades. So that would be the, I think, the sort of the base of what you're looking at in terms of the vanity trade. As far as spreading out from there, we're looking at Ulta, we're looking at ELF, we're looking at Estee Lauder, we're looking even at match.com, anything that the consumer can switch to, okay, now I've lost weight. I have a way of keeping it off and I'm starting to feel better about myself. Abby has been a big winner this year as well. So just think in terms of skin and beauty and health and even athletic wear, and that's kind of what we're waiting for, but we're not rushing. Obviously, the overall macro right now is more of a concern, but these would be the places we would go if we think things are settling down.
