To The Moon

If you have been following the S&P 500 sector, you will discover that over the past weeks, the consumer discretionary sector have not been performing.

We saw $Consumer Discretionary Select Sector SPDR Fund(XLY)$ lost 2.84% over a 5 day period, If we were to compare to the other sectors, this loss is quite significant and stand out.

I would like to look at what impact does the tariffs have on the consumer discretionary sector.

One of the names that is significant is $Tesla Motors(TSLA)$ and $Nike(NKE)$ , these are the 2 names which have lose quite significantly if we looked at the 5-day trending of the XLY.

These 2 names have lost more than 10% over the 5-day period, which we have seen the news of tariffs on China (10%) and China has retaliates, so considering how Nike production looks like, 22% of the footwear production is in China, and this is going to cause some impact to how China consumer looks at Nike products.

• Vietnam: ~50% of footwear production

• Indonesia: ~24% of footwear production

• China: ~22% of footwear production

Next, we look at Tesla, Tesla vehicles sales into China would be subjected to the 10% tax from China on American imported products, so in December 2024, Tesla sold 83,000 electric vehicles (EVs) in China, which was a 12.8% increase from November. This was a monthly record high for Tesla in China. 

And we are already seeing according to recent data from the China Passenger Car Association (CPCA), Tesla sold 63,238 vehicles in China during January 2025, which represents a 11.5% decrease compared to the previous year, with deliveries of China-made Model 3 and Model Y vehicles falling by 32.6% from December 2024. 

Why $Expedia(EXPE)$ Surge Might Not Save The Consumer Discretionary Sector

Some of us might look at the best performing stocks in consumer discretionary sector, which has gathered more than 13%, Expedia, together with Tapestry (TPR) and Yumi Brands, with more than 10%, but they are also subjected to tariffs impact as now the tariffs works both way.

So I think we need to understand how balancing tariffs might help the consumer discretionary sector.

Tariffs, essentially taxes on imported goods, can significantly impact the consumer discretionary sector. This sector comprises businesses that sell non-essential goods and services, like apparel, electronics, automobiles, and leisure activities.

Potential Effects Of Tariffs On Consumer Discretionary Sector

Potential Benefits

• Increased Domestic Production: Tariffs can make imported goods more expensive, potentially encouraging consumers to buy domestically produced items. This could boost sales for local businesses within the consumer discretionary sector.  

• Job Creation: Increased domestic production may lead to new job opportunities in manufacturing and related industries.

Potential Drawbacks

• Higher Prices: Tariffs can lead to higher prices for consumers as businesses pass on the increased costs of imported goods. This can reduce consumer spending, particularly on discretionary items.  

• Reduced Consumer Choice: Tariffs can limit the availability of certain imported goods, reducing consumer choice and potentially leading to dissatisfaction.  

• Trade Wars: Imposing tariffs can provoke retaliatory tariffs from other countries, leading to trade wars that harm businesses and consumers on a global scale.  

So How Can We Still Find Opportunities Amidst This Tariff Impact?

One of the way is to look at companies who might be focused on their domestic market but we need to understand that they also carry the risk of higher prices, reduced consumer choice, and broader economic disruption.  

Summary

While we might not have seen the overall impact of tariffs on the consumer discretionary sector yet as it is complex and depends on various factors, including the size and scope of the tariffs, the specific industries affected, and the overall state of the economy.

What we can do as investors is to stay invested and look out for opportunities which are still growing like A.I. and quantum computing, this might have a longer lead period, but I find that it has its advantage for us to get in early.

Appreciate if you could share your thoughts in the comment section whether you think consumer discretionary sector would be able to recover from the tariffs impact as we see more development on how the tariffs implementation goes.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.