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Why Consumer Staple Stocks Are Suddenly Back in StyleWhy Consumer Staple Stocks Are Suddenly Back in Style Rivas, Teresa. Barron's (Online); New York The stock market has seen plenty of turbulence recently, to say the least. Not surprisingly, consumer staples stocks are once again in vogue. Consumer staples stocks were a relative haven during last year's bear market, but investors quickly abandoned the group in January, as 2023's broader market rally gained steam . When everyone had seemingly regained their appetite for risk, there was little room for steady performers. The Consumer Staples Select Sector SPDR Fund (ticker: XLP) is still down about 3.5% year to date, even as the S&P 500 is in the black: But a look at more recent trading activity tells a different story. Over the past few days—tumultuous ones for the broader market, amid fears about the health of the banking sector —investors have once again flocked to the safety of staples. Over the last five days, the S&P 500 is down 2.5%—even with Tuesday's pop—while XLP has only edged down 0.5%. Some industry favorites have done even better, particularly best-in-class operators that have reported robust trends and growing sales in the face of inflation. Over the past week, Procter & Gamble stock (PG) is up 1.3%; shares of Colgate-Palmolive (CL) and Mondelez International (MDLZ) are both up 0.4%; and PepsiCo (PEP) is roughly break even. Likewise over the past month XLP, has lost just 2.2%, while the S&P 500 has slumped 6%. Of course, staples typically shine during market turmoil, so the sector's milder losses fit within a larger pattern. Rising interest rates may somewhat blunt the appeal of these companies' dividend yields, but that has largely been offset by investors' scramble for safety. In addition, consumer staples have demonstrated they have ongoing pricing power , which lessens some of inflation's pinch in terms of profits. The sector's underperformance earlier this year has also lowered the stocks' multiples a bit, as valuations had been bid up throughout 2022. Barron's argued earlier this year that select staples were still worth investors' attention. If Tuesday's rally isn't the end of the market's bank worries, the sector as a whole could find itself back in favor. |
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