The combination of rising interest rates and a stronger dollar is plaguing some asset classes and sectors. One of the epicenters of those woes may just be the consumer staples sector.
Year-to-date, the usually docile Consumer Staples Select SPDR (NYSEArca: XLP), the largest ETF tracking the consumer staples sector, is lower by more than 13% and things have not been any better for staples funds in recent weeks. Just this month, XLP has shed more than 7%.
XLP provides “exposure to companies from the food and staples retailing, beverage, food product, tobacco, household product and personal product industries in the U.S.,” according to State Street.
The ETF devotes more than half its weight to beverage makers and food and staples retailers. Tobacco companies, which have recently seen their shares tumble, account for almost 12% of XLP’s roster. Dow components Procter & Gamble (NYSE: PG) and Coca-Cola (NYSE: KO) combine for over 21% of XLP’s weight.
Bad News Equals Good? Consumer Staples ETFs Struggle
“The consumer staples sector is at the bottom of the S&P 500 for 2018 and tracking for its worst yearly performance in a decade. The charts are so bad they might actually be good, says one market watcher,” reports CNBC.
XLP currently resides just 2% above its 52-week low and more than 8% below its 200-day moving average. The fund has not closed above its 200-day line since February.
“Look at the long-term chart, it looks absolutely horrible,” said Matt Maley, equity strategist at Miller Tabak, in an interview with CNBC. “”It’s broken below its trend line going all the way back to the crisis lows of 2009,” Maley added. “It’s broken below its 2017 low, its 2016 low, its 200-day moving average.”
Year-to-date, investors have pulled nearly $887 million from XLP, but that number is deceiving because the ETF’s second-quarter outflows are close to $1 billion.
Rivals to XLP include the Vanguard Consumer Staples ETF (NYSEArca: VDC) and the Fidelity MSCI Consumer Staples Index ETF (NYSEArca: FSTA).
For more information on the consumer sector, visit our consumer staples category.