Because the proper trade is to respond only after JCP blew up proving that the US consumer is finished, here is Goldman finally joining the bandwagon of shorting the terminally tapped out all buying, all eating, all charging Joe Sixpack.
Moments ago from Goldman:
Recommending short positions in the US Consumer Discretionary sector
We are recommending a short position in the US Consumer Discretionary sector, with a target of a -6% move and a stop on a +3% move, following today's disappointing Philly Fed reading, which fell well short of expectations and suggests that activity may be slowing further in May. Our Advanced reading of the GLI showed that monthly growth, though still (only just) positive, continues to slip. This brings the GLI ever closer to the "Contraction" phase of the business cycle with its very clear negative implications for equity markets generally. We are expressing our negative view through the Consumer Discretionary sector because (1) it is a highly cyclical sector and (2) has been fairly robust relative to the overall market and other cyclical sectors over the last few months. In the current context, particularly with European worries back in focus and little visible in the near-term to ameliorate them, we are implicitly also taking a directional view on equity markets more generally.
We are aware that we may well be proven late to this trade. First, Consumer Discretionary stocks have sold off rather sharply in May, though they have not unwound their previous outperformance relative to the overall market and still look to be a leading cyclical sector. Second, it may turn out that the period of most dramatic slowing in the US data has already passed and has already been priced by the market. True, Philly Fed was a rather large disappointment, however other elements of the US data set seem more stable. So it may take further data disappointments to push discretionary stocks lower from here. As such, we will use our stop and upcoming data to manage this position.
Needless to say, it may be time to finally go long US consumers ahead of THE NEW QE and the USSA paradropping money to Joe Sixpack as per Willem Buiter's recent reco.