Consumer sentiment and economic cycles: Insights from Denise Chisholm - November 20, 2025
Fidelity’s Director of Quantitative Market Strategy, Denise Chisholm, shared her insights on consumer discretionary, sector dynamics, valuation trends and macroeconomic factors.
Here are some of the key points from her commentary.
Consumer sentiment as a contrarian market indicator
Denise highlighted that consumer sentiment is currently near recessionary lows, reflecting a cautious consumer mindset despite stable employment levels. She explained that while low consumer sentiment might suggest reduced spending, historical data show it often precedes stronger stock market returns over the next 12 months. This contrarian signal indicates that much of the negative outlook is already priced into equities, potentially creating buying opportunities. When consumers feel low, they tend to spend more when sentiment improves, supporting a positive market outlook.
Sector performance: opportunities in consumer discretionary and technology
The consumer discretionary sector has experienced challenges, partly due to the dominance of large-cap technology stocks. However, it has slightly outperformed the broader Russell 3000 index over the past year, showing resilience. Technology continues to lead market gains, supported by strong earnings growth and fundamentals, exemplified by companies like NVIDIA.
Valuation and challenges in healthcare and energy sectors
Healthcare is facing a secular downtrend with lower operating margins and valuation multiples, placing it at a valuation trough but with ongoing structural challenges. Denise advised caution on overweighting healthcare relative to technology and consumer discretionary. The energy sector shows weak demand despite supply constraints, leading to depressed valuations. Historical patterns suggest that such conditions can signal buying opportunities, but uncertainties remain, including the impact of technological changes like artificial intelligence.
Defensive sectors and evolving market dynamics
Traditional defensive sectors such as utilities, consumer staples and healthcare offer stability during volatility. Utilities stand out with improving fundamentals driven by demand exceeding supply, especially in electricity. Consumer staples and healthcare have lagged in margin expansion and returns. Denise noted that the definition of “defensive” is evolving, with energy and utilities gaining prominence due to structural supply factors and changing demand patterns linked to technology and economic shifts.
Macroeconomic factors: tariffs, inflation and the K-shaped recovery
Recent tariff reductions have eased consumer cost pressures, contributing to a moderated “wall of worry” in the market. Inflation trends nearing the Federal Reserve’s 2% target reduce the likelihood of aggressive interest rate hikes, supporting a more constructive environment for equities. The current k-shaped economic recovery highlights divergent experiences between high- and low-wage consumers, with credit spreads and wage growth normalizing. Denise conveyed that this nuanced economic backdrop suggests limited systemic risk and supports a cautiously optimistic outlook for consumer discretionary spending and broader market performance.
Denises sector rankings
Top three sectors:
- Technology
- Consumer Discretionary
- Financials
Bottom three sectors:
- Energy
- Consumer Staples
- Utilities
Conclusion: strategic positioning amid market complexity
Denise’s insights underscore the complexity of the current market landscape, marked by cautious consumer sentiment, sector-specific challenges and evolving macroeconomic conditions. Recognizing low consumer sentiment as a contrarian signal, capitalizing on technology’s growth leadership and identifying cyclical opportunities in consumer discretionary are key strategies. Selective exposure to healthcare and energy, along with adaptive defensive sector allocations, can help balance risk and opportunity. A balanced, informed approach with regular portfolio reviews and sector rotation aligned with market signals is essential for navigating today’s evolving market environment.
