Identifying the catalyst for soaring staples stocks in a strong dollar environment is not difficult. A well-heeled dollar usually means falling commodities prices. While XLP and VDC were racing higher following the end of QE2, the PowerShares DB Commodity Index Tracking ETF (NYSEArca: DBC) tumbled 15.1%.
DBC offers some exposure to some of the soft commodities used by staples companies such as corn, soybeans and sugar, indicating that ETFs such as XLP and VDC may actually be ideal strong dollar plays.
Past performances are never guaranteed to be repeated, but maybe this one is already enjoying a sequel. In the past 90 days, UUP and XLP are both up 2.3% while DBC is down 4%.
Vanguard Consumer Staples ETF
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of Procter & Gamble.