Are Consumer Staples ETFs Getting Mixed Signals? | ETF Trends

As consumer confidence is flagging, the fact remains that the consumer staples sector is one that can be a defensive back-up, as few will go without their necessities. Exchange traded funds (ETFs) such as the SPDR Consumer Staples Select Sector Fund (NYSEArca: XLP) is down about 1% over the past week, but can be a foolhardy play as inflation looms. [Will Retail and Consumer ETFs feel the Pressure of Inflation?]

According to a monthly survey, the Conference Board’s Consumer Confidence Index fell to a six-month low of 60.8 from a revised 66 in April. The high gas prices, poor job market and dismal housing outlook are beginning to drag on consumers, says Mae Anderson for Associated Press. The index is still far from a reading of 90, which indicates health in the economy.

“Consumers are considerably more apprehensive about future business and labor market conditions as well as their income prospects,” said Lynn Franco, director of The Conference Board Consumer Research Center.

High gas prices took consumers by their wallets, and the effects are now settling in. Analysts expect next months reading to be more upbeat, as the lower gasoline prices will be setting in. Overall, consumers are anxious, as higher prices are being seen across the board, and a pullback in spending is inevitable. [Investors Play Defense with Consumer Staples ETFs.]

“Overall, we see a mixed fundamental picture for the consumer staples area, but think the sector has defensive appeal when compared to other, more economically-sensitive sectors,” added the S&P analysts.

Tisha Guerrero contributed to this article.

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.