With higher beta, cyclical sectors leading U.S. equity markets higher this year, some defensive sectors are lagging. In the current environment, interest rates are rising, which can weigh on staples, a sector known to be rate-sensitive. Additionally, investors are overtly favoring the technology sector.
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.
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.