Defensive consumer staple sector-specific exchange traded funds are a bright spot in today’s tumultuous markets.
The Consumer Staples Select Sector SPDR Fund (NYSEArca: XLP) increased 2.3% over the past month and gained 1.1% year-to-date. Meanwhile, the SPDR S&P 500 ETF (SPY) declined 6.3% in the past month and decreased 13.2% year-to-date.
Investors have found a haven from all the market turmoil in companies that provide consumers’ everyday necessities, which has been highlighted by strong quarterly results, the Wall Street Journal reports. The consumer staples sector was the lone S&P 500 sector in the green for April, with a gain of 2.4%.
Close to 90% of consumer staples companies that have reported this season so far have reported better-than-expected profits, according to FactSet. Meanwhile, across industries in the index as a whole, that figure was at 80%.
“The boring, slow-growth, high-quality companies are doing well,” Louise Goudy Willmering, a partner at wealth-management firm Crewe Advisors, told the WSJ. “Those kinds of things which were not as appealing and sexy in the tech bonanza of the pandemic have been continuing to grow.”
While U.S. inflation is hovering at a four-decade high, investors have been watching how companies are keeping costs down or passing on the increases to customers through higher prices. So far, the reports from consumer staples companies indicated that households have yet to shy away from higher prices for basic goods.
“When it comes to everyday necessities, consumers for the most part are price insensitive,” Tom Galvin, chief investment officer at wealth-management firm City National Rochdale, told the WSJ. “They have job gains, they have wage gains, they have cash on hand and they’re willing to pay more money to enjoy life.… If I’m going to pay a nickel more for a can of my favorite beverage, it’s like, no big deal.”
For more news, information, and strategy, visit ETF Trends.