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What Investors Should Know about the Consumer Staples Sector

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Performance of the consumer staples sector in 2016

The consumer staples sector saw positive results in 2016. The Consumer Staples Select Sector SPDR ETF (XLP), which tracks the performance of the consumer staples sector, rose 3.8% in the year. It’s returned nearly 8.2% in the last two years.

The consumer staples sector showed an average performance in 2016. Rising consumer demand has been one of the major drivers of the performance of the sector, which is a defensive sector. It also has little correlation with the business cycle, so it’s known as a non-cyclical sector.

Investing in defensive sectors means taking positions in sectors such as utilities (XLU), healthcare (XLV), telecommunications (VOX), and consumer staples (VDC). US GDP showed a huge improvement in 3Q16. Consumer spending contributed most of this positive performance.

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Looking forward

The consumer staples sector is expected to perform better in 2017. Improvements in labor market conditions should help consumers to increase their spending, boosting the sector’s returns.

For more information, you may want to read After Trump’s Win, Where Could the Yuan Be Headed?

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