Even defensive sectors aren’t offering many shelters these days, but at the very least, the Consumer Staples Select SPDR (NYSEArca: XLP) and other consumer staples ETFs are performing less poorly than the broader market.
Consumer staples are those items that appear in our cupboards and closets, from shaving cream to soda. These items cover many everyday items and consumer goods that will continue to see demand regardless of the economic situation.
The consumer staples segment has long been viewed as a high-quality and defensive play. The slow and steady nature of the consumer staples business has long been touted as a safe play for all periods since consumers will still need to buy the basic necessities.
“Three things are helping the staples stocks hold up as consumers clear out supermarket shelves to prepare for the states of emergency being announced, said John Petrides, portfolio manager in the wealth management group at Tocqueville Asset Management,” reports CNBC.
XLP Performance Examination
XLP seeks to provide investment results that correspond generally to the price and yield performance of publicly traded equity securities of companies in the Consumer Staples Select Sector Index that includes securities of companies from the following industries: food and staples retailing; household products; food products; beverages; tobacco; and personal products.
Staples “they’re traditionally lower beta. They’re less volatile. They have higher yields. So, in an environment where global bond yields have really collapsed, people are looking for income,” Petrides said Friday on CNBC’s “Trading Nation.”
XLP seeks to provide precise exposure to companies from the food and staples retailing, beverage, food product, tobacco, household product, and personal product industries in the U.S.
Investors typically shift into consumer staples during bouts of market volatility because of the sector’s relatively generous dividend payouts and the slow-and-steady nature of the consumer staples business – consumers usually continue purchase basic products that staples firms sell regardless of market or economic conditions.
XLP yields almost 3%, well above what investor is currently getting on most U.S. government bonds.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.