The outlook for U.S. consumer discretionary stocks is significantly brighter than it is in Canada, and the main reason is consumer debt.
Canadian households are staggering under the weight of record debt levels, with the ratio of household debt to gross domestic product near 95 per cent. Meanwhile, rising U.S. wages and record low consumer debt levels form an optimistic outlook for American consumption. U.S. consumers were forced to shed debt during the financial crisis. Since 2009, U.S. household debt to GDP declined from 97.5 per cent to the current 81 per cent – evidence that Americans have a lot more room to increase spending.