Caution Call on Consumer Staples ETFs

Up nearly 5.2% this year, the Consumer Staples Select SPDR (NYSEArca: XLP) is one of this year’s best-performing sector exchange traded funds.

Additionally, the Guggenheim S&P Equal Weight Consumer Staples ETF (NYSEArca: RHS) and First Trust Consumer Staples AlphaDEX Fund (NYSEArca: FXG) have been standout performers.

But as the staples sector and the corresponding ETFs have soared in response to investors’ demand for lower beta, less risky assets, plenty of naysayers have continually said the sector is poised for a pullback.

Related: 13 Tasty Consumer Staples ETFs to Feast On

Staples ETFs such as XLP, the largest consumer staples ETF on the market, and rivals, including the Vanguard Consumer Staples ETF (NYSEArca: VDC) and the Fidelity MSCI Consumer Staples Index ETF (NYSEArca: FSTA), could be investor favorites if polls show a highly competitive presidential election as the summer months drag along.

Since April 30, 1945, the S&P 500 rose in price an average 1.4% from May through October, compared to an average 6.8% from November through April, writes Todd Rosenbluth, S&P Global Market Intelligence Director of ETF Research, in a research note.


Predictably, one of the criticism of the staples sector is that the group looks pricey.