Consumer Spending Signals
The slowdown in the Redbook index to 6.2% is an early warning that consumer spending might be cooling. For us, this suggests the impact of sustained high interest rates is finally filtering through to the average shopper’s wallet. We should therefore be cautious about sectors that rely heavily on consumer discretionary spending. This data point creates a tricky situation when viewed alongside other recent numbers. The February 2026 jobs report showed a still-solid gain of 215,000 jobs, but the most recent CPI inflation reading for February came in stubbornly high at 3.4%. This combination of slowing growth and sticky inflation makes the Federal Reserve’s path forward uncertain. Given this, we are looking at purchasing puts on retail-focused ETFs as a potential hedge over the next few weeks. This strategy allows us to protect against a potential drop in retail stocks if upcoming earnings guidance reflects this consumer weakness. It is a defined-risk way to position for a potential downturn in this specific sector. Looking back from our 2025 perspective, we recall the market volatility in 2023 when the Fed was aggressively hiking rates. Those events taught us that signs of consumer weakness can precede broader market downturns. This Redbook number feels like one of those early signals that we need to take seriously.Portfolio Protection Approach
Consequently, we are also considering protective strategies for broad market indices like the S&P 500. With the VIX volatility index hovering near a low of 14.5 last week, buying call options on the VIX could be an inexpensive way to insure the portfolio against a sudden market shock. This positions us for a potential increase in market anxiety if more weak data follows. Create your live VT Markets account and start trading now.
Start trading now – Click here to create your real VT Markets account
