Consumer staples sector in January 2018
The consumer staples sector generally acts as a defensive sector, and consumer staples companies have little correlation with economic cycles. These companies produce foods, beverages, and non-durable household goods. However, the consumer discretionary sector has a sizeable correlation with economic cycles.
The Consumer Staples Select Sector SPDR ETF (XLP), which tracks the performance of the consumer staples sector, rose 1.6% in January 2018. This ETF rose 13% in 2017. Major holdings of the XLP ETF such as the Procter & Gamble Company (PG), PepsiCo (PEP), and The Coca-Cola Company (KO) returned -5.3%, 0.3%, and 3.2%, respectively, in January 2018. The broader market S&P 500 Index rose 5.6% in the same month.
In the rising market environment, the consumer staples sector showed a marginal improvement. In the growing growth environment, major sectors of the US such as the financial, technology, industrial, and energy sectors showed strong improvements, as these sectors are highly correlated to economic growth.
The defensive sector generally performs well both during an economic upturn and during a downturn. Although its performance tends to stay slightly positive in an economic upturn, the sector tends to provide a solid performance during an economic downturn, as investors move their money to this sector during downturns.
In the next part of this series, we’ll analyze the performance of the utility sector in January 2018.