It all started on June 9 with investors selling Apple shares after a downgrade, and continued with more investors dumping their holdings in tech companies, such as Google parent Alphabet and Tesla, resulting in an unexpected correction in the technology sector:
At the same time, already weak sectors, such as energy, saw new waves of relentless selling:
More recently, consumer-related sectors have experienced a reversal of the previously bullish trend, as shown on the chart of the Fidelity Select Consumer Staples Fund (FDFAX). Companies in the consumer staples sector are traditionally considered stable investments and investors often use them as safe havens. The recent trend reversal is a worrisome new development in our opinion.
The consumer discretionary, also known as consumer cyclicals, sector is also following the same pattern:
Additional consumer cyclical sub-sectors, such as automotive and retailing, are also breaking down:
While sectors, such as financials, industrials, and health care, are still holding up in the recent selloff, the weakness in consumer stocks may be a cautionary sign ahead of the seasonally weak fall months.