March arrives Thursday and that could bring sector-level seasonal opportunities for tactical traders. One exchange traded fund to consider is the PowerShares Dynamic Food & Beverage Portfolio (NYSEArca: PBJ), which targets food and beverage companies.
PBJ, which is nearly 13 years old, follows the Dynamic Food & Beverage Intellidex Index. That benchmark is “is designed to provide capital appreciation by thoroughly evaluating companies based on a variety of investment merit criteria, including: price momentum, earnings momentum, quality, management action, and value,” according to PowerShares.
The combination of the expected interest rate hikes by the Federal Reserve and a stronger dollar were seen as potential drags on rate-sensitive consumer staples companies that derive significant portions of their revenue from ex-US markets. Amid fears of rising interest rates and concerns that the sector is overvalued even relative to its lofty historical norms, the consumer staples sector has recently encountered some headwinds.
However, PBJ is entering a seasonally strong period. The ETF posts an average March return of 3.38% and has never posted a March loss, according to Schaeffer’s Investment Research.
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.