The U.S. equity market seems to be on pause as investors await the outcome of the fiscal cliff and are uncertain if the economy can withstand the monetary drag. Consumer staples exchange traded funds such as the Consumer Staples Select Sector SPDR (NYSEArca: XLP) are a defensive sector investors could use to ride out the fiscal cliff negotiations.

“In the United States, S&P Capital IQ equity analysts have a neutral fundamental outlook for the consumer staples sector. They believe that sales are likely to increase due to growth in developing markets. Meanwhile, U.S unemployment is likely to remain high in 2013, helping private label brands to remain attractive to consumers at the expense of branded goods,” S&P Capital wrote in a recent note. [Why Consumer Staples ETFs are Holding Their Own]

The ratings company highlighted the iShares S&P Global Consumer Staples Index Fund (NYSEArca: KXI) and gave it an “Overweight” rating. The combination of good performance and modest risk earned it the high ranking, and with $497 million in assets under management, investors must agree. The fund weights about half of assets to the United States, and also exposes investors to the United Kingdom, Switzerland and Japan. The ETF is diversified well, as it covers packaged food and meat, tobacco, household products and soft drink companies, S&P Capital reported. [Investors Get Defensive with Consumer Staples ETFs]

KXI costs 0.48% and yields 2.61%. Top holdings include Nestle (NYSE: NESN) and Proctor & Gamble (NYSE: PG). Better yet, the overseas holdings are not unfamiliar, with brands such as Anheuser-Busch (NYSE: BUD) represented. Year-to-date, KXI has gained 15.6% versus 9% for XLP.

Another highlight of KXI during this period of the weak U.S. dollar is the foreign exchange rate. An uptick in consumer spending in emerging markets is also another long term factor for the case of investing in KXI. [Stock ETF Investors Could Win No Matter Who is President]

“Because of the global nature of the businesses held in KXI, foreign exchange rates are an important factor to consider before investing. U.S.-based firms comprise more than 52% of KXI’s assets, and given that the U.S. also is a major export market for this portfolio’s foreign-based companies, we’d closely evaluate the U.S. dollar’s level and future prospects. A relatively weak dollar in recent years has been a tailwind for some of KXI’s holdings in the form of favorable foreign currency exchange rates,” Robert Goldsborough wrote for Morningstar.