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Consumer Staples Continued Defensive Stance in March 2018

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Consumer staples sector

The consumer staples sector is a vital sector in the S&P 500 Index (SPY). It continued its defensive stance in March 2018. The Consumer Staples Select Sector SPDR ETF (XLP), which tracks the performance of the consumer staples sector, fell marginally by 0.9% in March 2018, while the broader market S&P 500 Index (SPY) fell 2.7% in that month.

Investors generally look at the consumer staples sector when uncertainty rises in the overall equity market. Procter & Gamble (PG), PepsiCo (PEP), and Coca-Cola (KO), major holdings of XLP, rose 0.96%, 0.2%, and 1.4%, respectively, in March.

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Import tariff and consumer staples sector

The overall selling pressure in the market marginally dragged down the performance of the consumer staples sector in March, while it fell nearly 7.6% in February 2018. However, major consumer staples stocks provided positive returns during the month.

Although market participants are expecting that there will be a severe market correction in the near future due to the rising concern about the potential trade war between China and the US, the consumer staples sector is expected to provide a good return due to its defensive nature. However, China’s recent announcement about the imposition of tariffs on 128 US products could affect the performance of major consumer staples stocks such as Tyson Foods (TSN), Walmart (WMT), and Walgreens Boots Alliance (WBA).

In the next part, we’ll analyze what the moving averages are indicating for the S&P 500 Index.

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