Discretionary / Staples Ratio

When consumers brace for harder times they cut the discretionary purchases first — new cars, home improvement, travel, dining — while staying current on staples like food and household goods. The stock market prices that rotation early, so the ratio of consumer-discretionary to consumer-staples sector performance has tended to roll over months before the consumer pullback shows up in spending data, ahead of the 2001, 2008, and 2020 downturns. It's the one recession signal on this dashboard that reads the equity market's own sector positioning rather than yields, credit spreads, or surveys — a different transmission channel than the VIX, GZ, and ANFCI cards, and a forward-looking complement to the consumer-stress reads on the Consumer Sentiment, Real Retail Sales, and Credit Card Delinquency cards. The line splices two measures. Before 2006 it's the cap-weighted XLY/XLP ratio, which has history back to ETF inception in 1998. From 2006 on it switches to the equal-weighted RSPD/RSPS ratio, rebased so the line stays continuous at the seam. The reason: cap-weighted XLY is now nearly half Amazon and Tesla, two names whose stock prices move substantially on cloud, AI, and narrative rather than on the consumer cycle — so the equal-weighted version, where each company counts roughly the same, is the cleaner cyclical read for the modern era. The split is defensible because the two measures only diverged once those megacaps came to dominate; pre-2006 they tracked closely, so cap-weight is a faithful backfill for the older recessions. The overlaid 200-day moving average is the line to read against the recession bars — the raw daily ratio is too noisy to interpret directly. Read direction-of-travel over levels: a ratio grinding lower while the moving average turns down is the configuration that has preceded consumer-led slowdowns, most reliably when the consumer-stress cards are deteriorating at the same time.