Industrials (XLI) vs Consumer Discretionary (XLY)
XLI (Industrial Select Sector SPDR Fund) and XLY (Consumer Discretionary Select Sector SPDR Fund) are both cyclical sectors but reflect different demand drivers. XLI top weights: GE Aerospace, Caterpillar, RTX, Boeing, Honeywell.
Also known as: Industrials (XLI) (ETF_XLI, industrials) · Consumer Discretionary (XLY) (ETF_XLY, consumer discretionary)
Why This Comparison Matters
XLI (Industrial Select Sector SPDR Fund) and XLY (Consumer Discretionary Select Sector SPDR Fund) are both cyclical sectors but reflect different demand drivers. XLI top weights: GE Aerospace, Caterpillar, RTX, Boeing, Honeywell. XLY top weights: Amazon ~22 percent, Tesla ~13 percent, Home Depot ~9 percent, McDonald's ~5 percent, Nike ~3 percent, TJX ~3 percent. April 2026: XLI ~$130 (defense + AI data center capex tailwind); XLY ~$220 (mixed - Amazon strong, Tesla -14% YTD). XLI/XLY ratio captures capex-cycle vs consumer-cycle relative strength. April 2026 setup: both pressured by different concerns. XLI benefits from defense + infrastructure; XLY pressured by GLP-1 + Tesla + consumer anxiety.
The April 2026 Configuration
XLI ~$130. XLY ~$220. XLI/XLY ratio approximately 0.59. XLI 2024 +20%, 2025 strong; XLY 2024 +30%, 2025 mixed.
XLI composition: aerospace/defense (GE, BA, RTX, LMT, NOC, GD) ~22%; capital goods/machinery (CAT, DE, ROK, ITW, EMR, ETN, PH) ~25%; transports (UNP, CSX, DAL, UPS, FDX, NSC) ~15%; building products (CARR, OTIS, JCI) ~5%; conglomerates (HON, MMM) ~10%.
XLY composition: Amazon ~22% (e-commerce, AWS), Tesla ~13% (autos, AI), Home Depot ~9% (housing renovation), McDonald's ~5% (food away), Nike ~3% (athletic), TJX ~3% (off-price retail), Booking ~3% (travel), Lowe's ~3%, Starbucks ~2%, Marriott ~2%.
April 2026: XLI driven by defense capex (NATO 2.5-3% GDP target) + AI data center construction (CAT, HON, JCI). XLY driven by Amazon + e-commerce; pressured by Tesla -14% YTD, GLP-1 affecting consumer (Mounjaro/Ozempic reducing food/beverage demand impacts MCD, SBUX), Iran war drag on consumer sentiment.
XLI/XLY ratio approximately stable in 2024-2026 reflecting balanced cyclical exposure.
Capex-driven vs Consumer-driven Cycles
XLI and XLY represent different cyclical drivers.
XLI capex-driven: business investment, defense spending, infrastructure capex, AI data center construction. Beneficiaries: CAT, DE, JCI, CARR. 5-10 year payoff cycles.
XLY consumer-driven: discretionary spending, autos, housing renovation, retail, travel, restaurants. Beneficiaries: Amazon (e-commerce), Tesla (auto), HD/LOW (renovation), MCD/SBUX (food away).
The cycle leadership rotates. Early-cycle: XLY leads (consumer spending recovery). Mid-cycle: XLI catches up (capex demand follows consumer demand). Late-cycle: both can lead. Recession: both fall.
April 2026 setup: XLI catching up phase (capex-driven) overlaps with XLY mixed (consumer anxiety + Tesla weakness). Different drivers but similar absolute performance.
How XLI and XLY Diverge
XLI > XLY: capex-driven cycle. Defense, infrastructure, AI capex driving. 2017-2018, 2024-2026 partial.
XLY > XLI: consumer-driven cycle. Strong consumer + retail + auto. 2009-2014 (post-GFC consumer recovery), 2020-2021 (COVID stimulus).
Both fall: recession (2008, 2020).
Both rally: expansion (2010-2018, post-COVID 2020-2021).
Long-run correlation 0.65-0.85 (both cyclicals). Strengthens during clear expansion/recession; weakens during late-cycle dispersion.
The Tesla Concentration in XLY
XLY has unusual concentration in Tesla (~13% weight). Tesla performance dominates XLY returns: -14% YTD 2026 driving XLY underperformance vs SPY despite Amazon strength.
Non-Tesla XLY = approximately 87% of weight. Amazon ~22%, HD/LOW ~12% combined, MCD/SBUX/CMG ~10%, Nike/TJX ~6%.
The practical implication: XLY response to consumer cycle masked by Tesla idiosyncratic. Amazon strength provides offset (e-commerce + AWS).
April 2026: Amazon ~$200 (positive YTD); Tesla -14% YTD; HD/LOW stable; MCD facing GLP-1 + premium pricing concerns; SBUX recovering.
The practical implication: XLI/XLY pair captures both cyclical leadership AND Tesla dispersion. Adjusted XLI/non-Tesla-XLY would show different dynamics.
How the Pair Performs Through Cycles
2007-2008 GFC: XLI -50% peak-to-trough; XLY -56%. Both fell. XLI/XLY relatively stable.
2009-2014 recovery: XLI +200%; XLY +250%. XLY led (consumer recovery).
2017-2018 capex bull: XLI +30%; XLY +25%. XLI led briefly.
2020 COVID: XLI -38%; XLY -32%. Both fell.
2020-2021 recovery: XLI +60%; XLY +85%. XLY led (stimulus + consumer recovery).
2022 hiking: XLI -20%; XLY -38%. XLY underperformed (consumer pressure + Tesla -73%).
2023-2024 AI: XLI +20%; XLY +30%. Mixed.
2025-2026: XLI strong (defense + AI capex); XLY mixed (Amazon strong, Tesla weak, GLP-1 affecting MCD/SBUX).
Pattern: cycle leadership rotates. XLY leads consumer-driven recoveries; XLI leads capex-driven mid-to-late cycles.
How the Pair Performs in Stress
2008-09 GFC: XLI -50%; XLY -56%. Both fell.
2018 Q4: XLI -22%; XLY -22%. Parallel.
2020 COVID: XLI -38%; XLY -32%. Both fell.
2022 hiking: XLI -20%; XLY -38% (Tesla impact).
2023 SVB: XLI -3%; XLY -2%. Limited stress.
2024-2026: XLI > XLY (capex narrative + Tesla weakness).
2026 Iran war: both modest stress.
Pattern: both cyclical, fall together in recessions. XLY underperforms during periods of Tesla weakness or consumer-specific stress.
Volatility and Trading
XLI realized vol ~16-22%. XLY ~22-30% (Tesla concentration adds volatility). 60-day correlation 0.65-0.85 (positive cyclical).
XLI exposure: XLI ETF or VIS. XLY exposure: XLY ETF or VCR. Direct: GE/CAT/RTX vs Amazon/Tesla/HD.
2009-2014 long XLY / short XLI gained substantially. 2024-2026 long XLI / short XLY moderate gains.
Most actionable: defense spending; capex announcements; consumer sentiment; Tesla/Amazon results.
Reading the Pair as a Trading Tool
XLI > XLY: capex-driven cycle (current 2024-2026 partial). Long XLI.
XLY > XLI: consumer-driven cycle.
Both fall: recession.
Both rally: expansion.
April 2026: XLI moderate outperformance. Tesla weakness + GLP-1 pressuring XLY. Watch defense capex; AI data center; Tesla recovery.
How XLI-vs-XLY Compares to Other Cyclical Pairs
XLI/XLY captures capex-vs-consumer cyclicality. Compared.
Vs XLE/XLF: cyclical but commodity (XLE) vs banking (XLF). Different drivers.
Vs IWM/SPY: small-cap vs large-cap cyclical. Captures size factor.
Vs XLB/XLI: materials vs industrials. Both capex-driven.
April 2026 reading: XLI > XLY modestly. Capex-driven cycle leadership.
Forward View: Watch Tesla and Defense
XLI ~$130; XLY ~$220. XLI/XLY ~0.59. Defense capex tailwind (NATO 2.5-3% GDP). AI data center construction. Tesla -14% YTD pressuring XLY. GLP-1 affecting MCD/SBUX.
Forward: Tesla Q2 2026 deliveries (early July). Big Tech Q1 2026 (Amazon AWS). Defense budget. AI data center construction.
Key watches: Tesla recovery; Amazon AWS growth; defense announcements; consumer sentiment.
Risks: Tesla continued weakness; consumer recession; AI capex disappointment; GLP-1 broader impact.
Conditional Forward Response (Tail Events)
How Consumer Discretionary (XLY) has historically behaved in the 5 sessions following a top-decile or bottom-decile daily move in Industrials (XLI). Computed from 1,266 aligned daily observations ending .
Following these triggers, Consumer Discretionary (XLY) rises 0.01% on average over the next 5 sessions, versus an unconditional baseline of +0.18%. 127 qualifying events; Consumer Discretionary (XLY) closed positive in 53% of them.
Following these triggers, Consumer Discretionary (XLY) falls 0.20% on average over the next 5 sessions, versus an unconditional baseline of +0.18%. 126 qualifying events; Consumer Discretionary (XLY) closed positive in 48% of them.
Past behavior in the tails is descriptive, not predictive. Mean response is the simple arithmetic mean of compounded 5-day forward returns following each trigger event; baseline is the unconditional mean across the full sample window. Edge measures the gap between the two.
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Frequently Asked Questions
What are XLI and XLY?+
XLI (Industrial Select Sector SPDR Fund) tracks industrial sector with top weights GE Aerospace ~5%, Caterpillar ~5%, RTX ~4%, Boeing ~4%, Honeywell ~4%, Union Pacific ~3%. XLY (Consumer Discretionary Select Sector SPDR Fund) tracks consumer discretionary with top weights Amazon ~22%, Tesla ~13%, Home Depot ~9%, McDonald's ~5%, Nike ~3%, TJX ~3%, Booking ~3%, Lowe's ~3%, Starbucks ~2%. April 2026: XLI ~$130; XLY ~$220. XLI/XLY ratio ~0.59. XLI 2024 +20%, 2025 strong; XLY 2024 +30%, 2025 mixed. XLI driven by defense capex + AI data center construction; XLY pressured by Tesla -14% YTD + GLP-1 affecting MCD/SBUX.
How do capex-driven and consumer-driven cycles differ?+
XLI capex-driven: business investment, defense spending, infrastructure capex, AI data center construction. Beneficiaries: CAT, DE, JCI, CARR. 5-10 year payoff cycles. XLY consumer-driven: discretionary spending, autos, housing renovation, retail, travel, restaurants. Beneficiaries: Amazon (e-commerce), Tesla (auto), HD/LOW (renovation), MCD/SBUX (food away). Cycle leadership rotates. Early-cycle: XLY leads (consumer spending recovery). Mid-cycle: XLI catches up. Late-cycle: both can lead. Recession: both fall. April 2026 setup: XLI catching up phase (capex-driven) overlaps with XLY mixed (consumer anxiety + Tesla weakness).
How do XLI and XLY diverge?+
XLI > XLY: capex-driven cycle. Defense, infrastructure, AI capex driving. 2017-2018, 2024-2026 partial. XLY > XLI: consumer-driven cycle. Strong consumer + retail + auto. 2009-2014 (post-GFC consumer recovery), 2020-2021 (COVID stimulus). Both fall: recession (2008, 2020). Both rally: expansion (2010-2018, post-COVID 2020-2021). Long-run correlation 0.65-0.85 (both cyclicals). Strengthens during clear expansion/recession; weakens during late-cycle dispersion.
How does Tesla concentration affect XLY?+
XLY has unusual concentration in Tesla (~13% weight). Tesla performance dominates XLY returns: -14% YTD 2026 driving XLY underperformance vs SPY despite Amazon strength. Non-Tesla XLY = ~87% of weight. Amazon ~22%, HD/LOW ~12% combined, MCD/SBUX/CMG ~10%, Nike/TJX ~6%. XLY response to consumer cycle masked by Tesla idiosyncratic. Amazon strength provides offset (e-commerce + AWS). April 2026: Amazon ~$200 positive YTD; Tesla -14% YTD; HD/LOW stable; MCD GLP-1 + premium pricing concerns; SBUX recovering. XLI/XLY pair captures both cyclical leadership AND Tesla dispersion.
How does the pair perform through cycles?+
2007-2008 GFC: XLI -50%; XLY -56%. Both fell. 2009-2014 recovery: XLI +200%; XLY +250%. XLY led (consumer recovery). 2017-2018 capex bull: XLI +30%; XLY +25%. XLI led briefly. 2020 COVID: XLI -38%; XLY -32%. Both fell. 2020-2021 recovery: XLI +60%; XLY +85%. XLY led (stimulus + consumer recovery). 2022 hiking: XLI -20%; XLY -38% (Tesla impact). 2023-2024 AI: XLI +20%; XLY +30%. 2025-2026: XLI strong (defense + AI capex); XLY mixed. Pattern: XLY leads consumer-driven recoveries; XLI leads capex-driven mid-to-late cycles.
How does the pair perform in stress?+
2008-09 GFC: XLI -50%; XLY -56%. Both fell. 2018 Q4: XLI -22%; XLY -22%. Parallel. 2020 COVID: XLI -38%; XLY -32%. Both fell. 2022 hiking: XLI -20%; XLY -38% (Tesla impact). 2023 SVB: XLI -3%; XLY -2%. Limited stress. 2024-2026: XLI > XLY (capex narrative + Tesla weakness). 2026 Iran war: both modest stress. Pattern: both cyclical, fall together in recessions. XLY underperforms during Tesla weakness or consumer-specific stress.
How is the pair traded?+
XLI realized vol ~16-22%. XLY ~22-30% (Tesla concentration adds volatility). 60-day correlation 0.65-0.85 (positive cyclical). XLI exposure: XLI ETF or VIS (Vanguard Industrials). XLY exposure: XLY ETF or VCR (Vanguard Consumer Discretionary). Direct: GE/CAT/RTX vs Amazon/Tesla/HD. 2009-2014 long XLY / short XLI gained substantially. 2024-2026 long XLI / short XLY moderate gains. Most actionable: defense spending announcements; capex announcements; consumer sentiment; Tesla/Amazon quarterly results.
How is the pair used for trading?+
XLI > XLY: capex-driven cycle (current 2024-2026 partial). Long XLI. XLY > XLI: consumer-driven cycle. Both fall: recession. Both rally: expansion. April 2026: XLI moderate outperformance. Tesla weakness + GLP-1 pressuring XLY. Watch defense capex; AI data center construction; Tesla recovery; Amazon AWS growth; consumer sentiment.
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