Consumer Cyclical: Confidence, Demographics Support Consumption Gains

• Consumer cyclical sector valuations remained at slightly elevated levels with a weighted average price/fair value ratio of 1.04 versus last quarter's 1.03. We attribute this to rising consumer and corporate confidence, a factor that should support spending across numerous discretionary industries. 
• We see consumer spend aided by baby boomer, millennial, and emerging market demographic tailwinds over the next several years.
• Travel is one industry that stands to benefit from favorable sentiment and demographics but should profit from technology investments that support brand, scale, and network advantages held by operators.
• The convenience and improved user experience of e-commerce continues to take steady share from brick and mortar retail. While we see department stores and the general apparel universe most at risk, newer startups have seen success through an ability to be nimble and to harness the power of technology to improve products and the shopping experience.

Consumer cyclical sector valuations remain a touch overheated, with a weighted average price/fair value ratio of 1.04, compared with last quarter's 1.03. We attribute this to historically high consumer and corporate confidence figures, implying consumers' willingness to spend remains robust.