In times of volatility in the markets, investors tend to flee growth assets in favor of safe havens. Case in point, look at a chart of the Consumer Staples Select Sector Index (IXR). Over the last six months, the index is one of only three broad sector indices that was positive.
Data Range: 5/31/2018 – 12/01/2018. Source: Bloomberg. The performance data quoted represents past performance. One cannot invest directly in an index.
That index is tracked by two of Direxion’s newest leveraged sector ETFs, the Direxion Daily Consumer Staples Bull 3X Shares ETF (NEED) and Direxion Daily Consumer Staples Bear 3X Shares ETF (LACK), which launched at the tail end of November. Each fund aims to deliver 300 percent (or -300 percent) the daily performance of that index.
Among the standout components that have carried IXR to a decent end-of-year rally, until this week, are beverage giants Coca-Cola and PepsiCo, up nearly 15 and 18 percent over the past six months, respectively. Proctor Gamble, another exceptional gainer in the index, is higher by 25 percent from six months ago and up more than 10 percent since the start of October on the back of solid earnings that were delivered in the thick of October’s volatility.
Coca-Cola helped lead the late-year rally
Data Range: 5/31/2018 – 12/13/2018. Source: Bloomberg. The performance data quoted represents past performance. One cannot invest directly in an index.
Beverage names make up about 25 percent of the funds, with household products making up the second largest weighting at 20 percent. The five largest holdings as of the end of November are Procter Gamble (11.99 percent), Coca-Cola (10.44 percent), Phillip Morris (9.65 percent), PepsiCo (9.49 percent), and Walmart (7.59 percent).
Not every name in the index has been strong of late, of course. But with a general sense of uncertainty gripping markets right now, it appears the volatility will continue through the end of the year. If that were to happen we can expect a flight to defensive names in this sector, bringing with it an opportunity for traders.
Technicals
The S&P Select Consumer Staples Index tested the 100-Day moving average intraday on December 6th, but closed notably off the session lows. Technical traders may believe that this means the consumer staples basket is trading near a pivotal level. An upside move off of a support level can be magnified with the NEED. Traders seeking to capitalize on a breakdown of this longer term support, may consider LACK.
Data Range: 12/29/2017 – 12/6/2018. Source: Bloomberg. The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate. An investor’s shares, when redeemed, may be worth more or less than their original cost; current performance may be lower or higher than the performance quoted. For standardized performance and the most recent month-end performance, click here.
Related Leveraged ETFs
- Direxion Daily Consumer Staples Bull 3X Shares ETF (NEED)
- Direxion Daily Consumer Staples Bear 3X Shares ETF (LACK)