The long XLP and long XLU thesis has some points in its favor as August starts. Treasury yields are declining and investors appear comfortable with the notion that there are at least several months ahead before the Federal Reserve raises interest rates.
“Margins appear to be getting squeezed this year, and the strong USD isn’t helping things by acting as a headwind to revenue growth from abroad, resulting in a forecast decline in EPS this year. Estimates for next year look better. In any case Consumer Staples stocks have seen their P/E multiples expand considerably over the last five years. As a result these stocks appear rather expensive, and Staples has an UNDERWEIGHT recommendation,” according to AltaVista.
Consumer Staples Select Sector SPDR
