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Constituting a broad range of essential products, ranging from foods and beverages, household goods, alcohol and tobacco, the consumer staple sector is largely considered to be non-cyclical and defensive.
Remaining resilient throughout business cycles, consumer staples maintain their demand stability regardless of economic fluctuations. Exhibiting a unique ability to generate a steady flow of revenues, consumer staples are less susceptible to downturns compared to other sectors.
In a bear market, consumer staples provide much-needed support to investors’ portfolios, as demand for the stocks in the sector increases driven by their robust dividend yield, low volatility nature, reliable profitability and the ability to deliver steady growth.
Inflation Heating Up
Inflation levels in the U.S., surged more than expected, marking the third consecutive month where consumer price readings have remained robust. The US consumer price index (CPI) rose by 0.4% sequentially, exceeding estimates from Wall Street.
Over the 12-month period ending in March, the CPI registered a 3.5% year-over-year uptick, marking its most substantial upswing in six months since September 2023, following a 3.2% increase in February 2024 (Read: ETF Strategies to Play Hot inflation Data).
Interest Rate Cut Uncertainty
The unexpected surge in inflation data has led market participants to reassess their rate-cut expectations. After pricing in about six to seven rate cuts at the start of the year, markets are now speculating only one to two cuts by the end of 2024, following recent economic data that have pushed back rate cut bets.
Recent remarks from Fed Chair Jerome Powell, as quoted on CNBC, consolidated the likelihood of postponed interest rate cuts. Jerome Powell recently remarked that it is likely to take longer than previously anticipated to bring back inflation to the Fed’s benchmark level, leaving Wall Street to wonder whether there will by any rate cuts this year.
The increasing probability that the Fed may keep interest rates elevated for a while heightens the necessity to diversify risk with increased exposure to consumer staple funds.
Escalating Geopolitical Tensions
According to CNBC, Iran initiated a flurry of explosive drones and missiles directed toward Israel, marking its initial direct assault on Israeli territory. This could escalate a decade-old standoff between the two regional adversaries, raising concerns over a potential escalation in unrest in the Middle East.
The retaliation of Israel by carrying out a military strike inside Iran, according to a U.S. official, as quoted on CNN, only adds fuel to the fire, worsening tensions in the region. This recent incident might lead to investors taking part in panic-selling and increase the demand for safe-haven investment alternatives.
Mounting Debt Problems in the United States
According to the IMF, as quoted on CNN, the economy of the United States faces risks of overheating driven by a surge in government spending, increasing public debt and heightened interest rates, which contribute to high and volatile yields, increasing financial instability.
The U.S. debt level, which is currently at nearly $35 trillion, according to estimates of the Treasury Department, makes it more difficult for the Fed to control inflation and curb interest rates.
An already high interest rate and the IMF estimating U.S. public debt to rise in the future will make it more difficult for borrowers to repay their debt obligations. Debt repayments can burn a significant hole in consumers’ pockets, indicating that consumers can shift toward more budget-conscious choices as they tend to prioritize essential products, benefiting consumer staple stocks.
Explore Consumer Staples ETFs
Increasing exposure to consumer staple funds can bring balance and stability to investors’ portfolios. Investors can put more money in consumer staples funds to safeguard themselves from the potential market downturn.
By increasing their exposure to this sector, investors can mitigate concerns surrounding market volatility, ensuring a more worry-free investment approach. Moreover, the sector also performs well in line with the economy, offering investors a dual advantage and positioning them for success regardless of market conditions.
Consumer Staples Select Sector SPDR Fund (XLP - Free Report)
Consumer Staples Select Sector SPDR Fund has amassed an asset base of $14.56 billion and has a basket of 38 securities. The fund has a dividend yield of 2.85% and charges an annual fee of 0.09%. XLP invests about 98.4% of its asset base in large-cap securities, providing further stability to the fund.
Consumer Staples Select Sector SPDR Fund has gained 5.15% over the past year and 6.6% over the past three years. Over the past five years, the fund has been on an upward trajectory, growing by 9.23%.
Vanguard Consumer Staples ETF has gathered an asset base of $6.32 billion and has a basket of 103 securities. The fund has a dividend yield of 2.59% and charges an annual fee of 0.10%. VDC invests about 62.4% of its asset base in large-cap securities and about 73.73% in the consumer staples sector.
Vanguard Consumer Staples ETF has gained 8.24% over the past year and 7.27% over the past three years. Over the past five years, the fund has been on an upward trajectory, growing 9.78%.
iShares U.S. Consumer Staples ETF has gathered an asset base of $1.23 billion and has a basket of 55 securities. The fund has a dividend yield of 2.71% and charges an annual fee of 0.40%. IYK invests about 94.4% of its asset base in large-cap securities, providing further stability to the fund.
iShares U.S. Consumer Staples ETF has gained 4.65% over the past year and 7.06% over the past three years. Over the past five years, the fund has been on an upward trajectory, growing 13.59%.
iShares Global Consumer Staples ETF has an asset base of $826.8 million and has a basket of 100 securities. The fund has a dividend yield of 3.02% and charges an annual fee of 0.41%. KXI invests about 61.78% of its assets in the United States and about 94.8% in large-cap securities.
iShares Global Consumer Staples ETF has gained 1.72% over the past year and 4.17% over the past three years. Over the past five years, the fund has been on an upward trajectory, growing 5.91%.
Invesco S&P 500 Equal Weight Consumer Staples ETF has an asset base of $422.7 million and has a basket of 39 securities. The fund has a dividend yield of 2.80% and charges an annual fee of 0.40%. KXI invests about 92.7% of its asset base in large-cap securities and being an equal-weighted fund, it provides investors with a more balanced and diversified portfolio.
Invesco S&P 500 Equal Weight Consumer Staples ETF has lost 0.61% over the past year and 4.01% over the past three years. Over the past five years, the fund has been on an upward trajectory, growing 7.21%.
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Shield Your Wealth With Consumer Staple ETFs
Constituting a broad range of essential products, ranging from foods and beverages, household goods, alcohol and tobacco, the consumer staple sector is largely considered to be non-cyclical and defensive.
Remaining resilient throughout business cycles, consumer staples maintain their demand stability regardless of economic fluctuations. Exhibiting a unique ability to generate a steady flow of revenues, consumer staples are less susceptible to downturns compared to other sectors.
In a bear market, consumer staples provide much-needed support to investors’ portfolios, as demand for the stocks in the sector increases driven by their robust dividend yield, low volatility nature, reliable profitability and the ability to deliver steady growth.
Inflation Heating Up
Inflation levels in the U.S., surged more than expected, marking the third consecutive month where consumer price readings have remained robust. The US consumer price index (CPI) rose by 0.4% sequentially, exceeding estimates from Wall Street.
Over the 12-month period ending in March, the CPI registered a 3.5% year-over-year uptick, marking its most substantial upswing in six months since September 2023, following a 3.2% increase in February 2024 (Read: ETF Strategies to Play Hot inflation Data).
Interest Rate Cut Uncertainty
The unexpected surge in inflation data has led market participants to reassess their rate-cut expectations. After pricing in about six to seven rate cuts at the start of the year, markets are now speculating only one to two cuts by the end of 2024, following recent economic data that have pushed back rate cut bets.
Recent remarks from Fed Chair Jerome Powell, as quoted on CNBC, consolidated the likelihood of postponed interest rate cuts. Jerome Powell recently remarked that it is likely to take longer than previously anticipated to bring back inflation to the Fed’s benchmark level, leaving Wall Street to wonder whether there will by any rate cuts this year.
The increasing probability that the Fed may keep interest rates elevated for a while heightens the necessity to diversify risk with increased exposure to consumer staple funds.
Escalating Geopolitical Tensions
According to CNBC, Iran initiated a flurry of explosive drones and missiles directed toward Israel, marking its initial direct assault on Israeli territory. This could escalate a decade-old standoff between the two regional adversaries, raising concerns over a potential escalation in unrest in the Middle East.
The retaliation of Israel by carrying out a military strike inside Iran, according to a U.S. official, as quoted on CNN, only adds fuel to the fire, worsening tensions in the region. This recent incident might lead to investors taking part in panic-selling and increase the demand for safe-haven investment alternatives.
Mounting Debt Problems in the United States
According to the IMF, as quoted on CNN, the economy of the United States faces risks of overheating driven by a surge in government spending, increasing public debt and heightened interest rates, which contribute to high and volatile yields, increasing financial instability.
The U.S. debt level, which is currently at nearly $35 trillion, according to estimates of the Treasury Department, makes it more difficult for the Fed to control inflation and curb interest rates.
An already high interest rate and the IMF estimating U.S. public debt to rise in the future will make it more difficult for borrowers to repay their debt obligations. Debt repayments can burn a significant hole in consumers’ pockets, indicating that consumers can shift toward more budget-conscious choices as they tend to prioritize essential products, benefiting consumer staple stocks.
Explore Consumer Staples ETFs
Increasing exposure to consumer staple funds can bring balance and stability to investors’ portfolios. Investors can put more money in consumer staples funds to safeguard themselves from the potential market downturn.
By increasing their exposure to this sector, investors can mitigate concerns surrounding market volatility, ensuring a more worry-free investment approach. Moreover, the sector also performs well in line with the economy, offering investors a dual advantage and positioning them for success regardless of market conditions.
Consumer Staples Select Sector SPDR Fund (XLP - Free Report)
Consumer Staples Select Sector SPDR Fund has amassed an asset base of $14.56 billion and has a basket of 38 securities. The fund has a dividend yield of 2.85% and charges an annual fee of 0.09%. XLP invests about 98.4% of its asset base in large-cap securities, providing further stability to the fund.
Consumer Staples Select Sector SPDR Fund has gained 5.15% over the past year and 6.6% over the past three years. Over the past five years, the fund has been on an upward trajectory, growing by 9.23%.
Vanguard Consumer Staples ETF (VDC - Free Report)
Vanguard Consumer Staples ETF has gathered an asset base of $6.32 billion and has a basket of 103 securities. The fund has a dividend yield of 2.59% and charges an annual fee of 0.10%. VDC invests about 62.4% of its asset base in large-cap securities and about 73.73% in the consumer staples sector.
Vanguard Consumer Staples ETF has gained 8.24% over the past year and 7.27% over the past three years. Over the past five years, the fund has been on an upward trajectory, growing 9.78%.
iShares U.S. Consumer Staples ETF (IYK - Free Report)
iShares U.S. Consumer Staples ETF has gathered an asset base of $1.23 billion and has a basket of 55 securities. The fund has a dividend yield of 2.71% and charges an annual fee of 0.40%. IYK invests about 94.4% of its asset base in large-cap securities, providing further stability to the fund.
iShares U.S. Consumer Staples ETF has gained 4.65% over the past year and 7.06% over the past three years. Over the past five years, the fund has been on an upward trajectory, growing 13.59%.
iShares Global Consumer Staples ETF (KXI - Free Report)
iShares Global Consumer Staples ETF has an asset base of $826.8 million and has a basket of 100 securities. The fund has a dividend yield of 3.02% and charges an annual fee of 0.41%. KXI invests about 61.78% of its assets in the United States and about 94.8% in large-cap securities.
iShares Global Consumer Staples ETF has gained 1.72% over the past year and 4.17% over the past three years. Over the past five years, the fund has been on an upward trajectory, growing 5.91%.
Invesco S&P 500 Equal Weight Consumer Staples ETF (RSPS - Free Report)
Invesco S&P 500 Equal Weight Consumer Staples ETF has an asset base of $422.7 million and has a basket of 39 securities. The fund has a dividend yield of 2.80% and charges an annual fee of 0.40%. KXI invests about 92.7% of its asset base in large-cap securities and being an equal-weighted fund, it provides investors with a more balanced and diversified portfolio.
Invesco S&P 500 Equal Weight Consumer Staples ETF has lost 0.61% over the past year and 4.01% over the past three years. Over the past five years, the fund has been on an upward trajectory, growing 7.21%.