Casinos and cruise lines at yearly lows, consumer spending crumbles first

The short version

• Wynn Resorts, Las Vegas Sands, VICI Properties and Carnival marked new 52 week lows on 1 September.
• On that day twelve companies in the S&P 500 recorded a yearly low, but only seven a yearly high.
• Cyclical consumer is the weakest of the eleven sectors this year with minus 2.3 percent, while eight sectors are up.

Four yearly lows from the same industry

Travel and leisure stocks were among the losers in the S&P 500 on 1 September. Wynn Resorts, Las Vegas Sands, VICI Properties and Carnival marked new 52 week lows.

In total twelve companies in the index recorded a yearly low on that day, but only seven a yearly high.

The connection with consumer spending is direct. Cyclical consumer is the weakest of the eleven sectors this year with minus 2.3 percent, while eight sectors are up.

What the economic data says about it

The data fits with that. American retail sales fell in July against expectations, and consumer confidence darkened more strongly than expected.

Two observations therefore point in the same direction. The prices of the postponable spending are giving way, and the figures on purchases and on household mood are giving way as well.

The special case of VICI Properties

A special case among the stocks named is VICI Properties. The company does not run casinos but owns the properties and rents them out.

That is probably at work here, because yields in the bond market have risen lately.

Energy costs come on top

Energy costs come on top. Higher fuel prices make flights and cruises more expensive directly and at the same time tie up a larger share of the household budget.

The same item therefore hits the same industry twice. It raises the provider's costs and reduces the money the customer has left for a trip.

Assessment

Four yearly lows from the same corner on one day are no coincidence but a pattern.

What interests me about it is the order. Travel and leisure react earlier than the broad consumer sector, because the decision is easier to postpone. Whoever postpones a cruise barely notices it. Whoever does not pay the rent certainly does.

The VICI case also shows how two causes can come together. Weaker consumer spending and rising bond yields act on the same price here, although they have nothing to do with each other.

Frequently asked questions

Why do travel stocks count as an early indicator

Because spending on travel, entertainment and gambling is among the first that households cut when money gets tighter. It can be postponed, unlike rent, energy or food. That is why such industries show the spending mood more clearly than surveys.

Why does VICI Properties fall with the casino operators

VICI Properties does not run casinos but owns the properties and rents them out. Such stocks are often treated like bonds, because what matters above all is the ongoing distribution. If yields in the bond market rise, and that has happened lately, they lose their appeal regardless of how well the tenants pay.

How did the index stand overall on that day

On 1 September twelve companies in the S&P 500 recorded a yearly low and only seven a yearly high. Cyclical consumer is the weakest of the eleven sectors this year with minus 2.3 percent, while eight sectors are up.

This analysis is for information only and is not investment advice.