“By many valuation metrics, however, consumer staples are quite overvalued. As of May 23, 2016, the Consumer Staples Select Sector ETF had a trailing price-to-earnings (P/E) ratio of 21 compared to 18 for the S&P 500. Its P/E-to-growth (PEG) ratio of 2.5 tops the S&P 500’s 1.8,” reports Investopedia.
Related: Sticking With Staples ETFs: Is it a Good Idea?
Defensive sectors often trade at premium valuations relative to the broader market and that is certainly the case at the moment with the consumer staples and utilities groups.
However, that does not mean investors should flee richly valued groups such as consumer staples and utilities. In fact, the case for these higher-yielding sectors could be getting a boost as bond markets are pricing in diminishing chances of the Federal Reserve boosting interest rates later this year.
For more information on the consumer sector, visit our consumer staples category.
Consumer Staples Select Sector SPDR
