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 month while also reducing the odds of a September rate hike.
Related: Paying For Protection
“If we turn to momentum, we can see that 86% of DM Americas consumer staple stocks still have the 50-day moving average trading above the 200-day moving average. This will probably fall back in the coming weeks as prices consolidate, but it is a good indicator that the overall momentum of the group is positive,” adds ValueWalk.
For more information on the consumer sector, visit our consumer staples category.
Consumer Staples Select Sector SPDR
