Morgan Stanley Wealth Management has told its clients to "consider taking profits" in the consumer-discretionary sector and has offered three alternatives.

Consumer spending contributes to more than two-thirds of the US economy's growth.

The firm's investment committee said the economic boost from tax cuts may be short-lived, and highlighted other trends that could set back the American consumer.

The consumer-discretionary sector is the stock market's best performer of the last decade — but now it's time to consider taking profits, says Morgan Stanley Wealth Management.

The sector's chart-topping performance on the S&P 500 is just one reason for the recommendation offered by Lisa Shalett, the head of investment and portfolio strategies, in a note on Monday.

Companies in the sector range from automakers to apparel makers and casinos, which make goods and services that consumers splurge on. Consumer spending contributes to more than two-thirds of the economy's growth.

And so, Shalett's sector call further makes the case that the backbone of the $20 trillion-plus US economy could be headed for a slowdown.

It comes even as the US economy remains in recovery mode, with growth in the second quarter rising at the fastest pace since 2014; a revision is due Wednesday. Consumer confidence in August was the highest in 18 years, according to the Conference Board. Retailers from Walmart to Target reported strong second-quarter earnings.

Shalett doesn't discount any of these signs, but says they may not be telling the full story.

"The Global Investment Committee is skeptical, believing that current expectations and stock valuations embed a continuation of cycle peak trends when, in fact, we see the data rolling over, headwinds strengthening and household balance sheets increasingly stressed," she said.

Shalett says consumer spending may lose its strength as the dual benefits of tax cuts and increased fiscal spending fade. That's separate from the recent and specific data that's of concern to Morgan Stanley.

According to the Tax Policy Center, a Washington, DC-based think tank, the tax cuts would add 0.7% to US Gross Domestic Product this year, 0.4% in 2021, and just 0.1% in 2026. After individual tax cuts expire in 2027, the TPC doesn't expect any economic boost.

For now, one trend that could put the brakes on consumption growth is housing affordability, Shalett said. A separate Morgan Stanley analysis recently showed that Americans are forking out the most in monthly mortgage payments relative to their incomes since 2008.

"At issue is that housing costs have outpaced growth in real personal income, a situation that in the past has coincided with a slowdown in consumer spending," Shalett said.

The ratio of interest and principal payments as a share of monthly income is at 22%, thanks to rising home prices and higher mortgage rates. With the Federal Reserve expected to continue raising interest rates through next year at least, there's no short-term fix to the affordability problem in sight.

Another area of vulnerability is in how consumer-focused companies respond to rising costs. These so-called supply chain pressures include higher freight costs, energy costs, and wages, which could squeeze profit margins and be passed on to consumers.

"Consider taking profits in the consumer discretionary sector," Shalett said. "Focus on active managers and more defensive plays in health care, consumer staples and utilities."