From this week’s interview with Arnie Schneider in Barron’s:

“It is just inconsistent to me that home builders are trading at new lows and retailing stocks are trading at new highs. That isn’t the way the economy works. They’re more closely linked than that. I think the reason [for this disconnect] is that 94% of homeowners have over 10% equity in their homes. They have unrealized losses versus a year ago, but they still have realized gains in their homes and they are not forced sellers. As long as they have a job, consumers are going to continue to spend and be confident, and that is why we are most likely to avoid a recession. But the foundation is weaker.

If you look at the financial-obligations ratio, it is at an all-time high. Mortgage-equity withdrawal is half its peak level, but it is still way above normal and there are lags there. The headwinds on the consumer have started and they are gathering, but it takes a shock to tumble the economy into a recession.”

Here’s a picture of the RTH - XHB disconnect, but I don’t know if it’s that big a deal.