Cyclical sectors are now this year’s best-performing groups. That could be further confirmation investors expect interest rates to rise because cyclical sectors usually perform well as borrowing costs increase.
Staples stocks are comparably valued to their consumer discretionary peers, but some market observers argue that possible increases in household debt would make staples more attractive while wage growth would likely benefit both consumer sectors.
As measured by XLP, “the sector has tripled since the 2009 low, even before factoring in a solid dividend yield. Perhaps the best characteristic of the bull market in consumer staples, though, has been its steady, low-volatility path. At just about -12%, XLP has experienced the smallest post-2009 maximum drawdown of any of the sectors. This has provided for a relatively smooth ride for consumer staples investors,” reports ETF Daily News.
For the week ended Oct. 10th, investors pulled over $1 billion from XLP, bringing the ETF’s 2017 outflows to about $818 million.
For more information on the consumer sector, visit our consumer staples category.