Customers didn’t stop spending. Companies stopped serving

When Wall Street traders decide they’ve maxed out the value they can get from a particular sector of the market — tech, say — they’ll often cash out and move their profits into another area. It’s called a sector rotation, and it happens all the time as part of the natural course of a business cycle. 

When Wall Street traders decide they’ve maxed out the value they can get from a particular sector of the market — tech, say — they’ll often cash out and move their profits into another area. It’s called a sector rotation, and it happens all the time as part of the natural course of a business cycle. When consumers decide they’ve maxed out the value they can get from the things they typically buy, business leaders tend to view it with alarm — a sign that folks don’t have the money to spend and therefore a recession must be on the horizon. But what if those consumers are just behaving like traders, and finding value elsewhere? On earnings calls in recent weeks, executives have bemoaned the customer “pullback.” McDonald’s and Starbucks sales declined, so there must be some serious belt-tightening going on. On top of that, fewer people are booking Airbnbs, and families are skipping trips to Disneyland. The horror! Everybody sell, we must be barreling toward an economic cliff!  Of course, that’s not what’s actually happening.