Despite a recession, financial pros are touting the consumer staples portfolios and exchange traded funds (ETFs) as good performers during the next few months.
This year so far, some of the better performers are those funds that zero in on toothpaste, food and paper towels. Some of these funds are down 20% instead of 30%-40% as the broader market is, says John Spence for The Wall Street Journal. The consumer staples is seen as a defensive play in a down market.
Consumer staples companies tend to have steadier revenue even when the economy pulls back. These stocks won’t soar in speculative bull markets, but they tend to weather bear markets in good shape.
Sector funds aren’t meant to be core portfolio holdings and investors go to them at the same time they flock to health care and dividend-focused ETFs. This time around, the consumer staples are offering up smaller losses then the rest of the market, although they are still in the negative. Some of these funds might be hit by a consumer pullback in food spending.
Consumer staples ETFs typically hold shares of well-established, profitable businesses that also pay respectable dividends. These companies have little debt and touch down upon many corners of the market.
- Consumer Staples Select Sector SPDR (XLP), down 13.4% year-to-date
- Vanguard Consumer Staples (VDC), down 15.1% year-to-date
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.