Market optimism clearly cooled after the retail data crashed.
Under the base effect of November's “Black Friday,” the month-on-month decline in December is already a consensus.
The reason for this, the essence of the market shift is the point in time — the current market has already entered the earnings season (after Goldman Sachs's earnings report).
The market needs to change from “shortsightedness” to “backsight”. The decline in data for two consecutive months in November and December proves that the market needs to adjust its optimistic expectations for the fourth quarter. Especially for group value stocks whose expectations have not been adjusted.
This also explains why adjustments are mostly appearing in value sectors such as XLU, XLE, and XLP.
I don't think the retail data itself is that big of a problem; the data slowdown itself is a base case in the context of the Fed's interest rate hike. The US private sector still has trillions of dollars in excess savings. Furthermore, against the backdrop of falling inflation, real wages in the private sector have already begun to make a U-turn and pick up in December. Consumption cooling is a defensive move by consumers in the face of pessimistic expectations. It is also the result of the work of the Federal Reserve. If expectations change, consumption will pick up very quickly. After all, I really have money in my pocket.
Furthermore, the performance of the bond market is also confusing. On the previous trading day, the market bet on the shift of the central bank of Japan and the yield on predetermined US bonds rose. After BoJ maintained a dovish attitude, US bond yields declined, compounded by the impact of retail sales data falling short of expectations, amplifying the market's fear of a recession.
This is a slow down/recession led by the Federal Reserve. Naturally, I'm still in the post-earnings season...