Consumer sector soars
On Friday, Donald Trump announced tariffs on Mexico would be postponed as the Mexican government had agreed to help limit illegal immigration into the US. Rising trade tensions and economic growth have shifted investors’ focus to the more defensive consumer sector.
According to CNBC, Goldman Sachs chief US equity strategist David Kostin stated that when the Fed cuts rates, the healthcare and consumer staples sectors strengthen.
After bets on rate cuts rose on Friday, the consumer sector saw all-time highs. The Consumer Staples Select Sector SPDR ETF (XLP) rose 5.4%, and the Consumer Discretionary Select Sector SPDR ETF (XLY) rose 4.3%.
Campbell Soup (CPB), Brown-Forman (BFB), Conagra Brands (CAG), Estée Lauder (EL), and Coty (COTY) topped the consumer staples sector last week, rising 18.6%, 13.0%, 10.7%, 9.8%, and 9.6%, respectively. Meanwhile, Aptiv (APTV), Under Armour (UAA), BorgWarner (BWA), Whirlpool (WHR), and Hasbro (HAS) topped the consumer discretionary sector, rising 14.6%, 13.6%, 12.0%, 12.0%, and 11.3%, respectively.
Trade tensions hurt the stock market in May. However, rate-cut optimism boosted the S&P 500 by 4.4% last week. According to The New York Times, Trump’s expected meeting with Chinese president Xi Jinping on additional tariffs on China could affect rate cuts.
The Fed is set to meet on June 18 and 19 and July 30 and 31. We need to pay close attention to how trade talks and the economic situation affect the Fed’s stance.