Should You Invest in Consumer Staples ETFs? Let's Explore
Investors can consider parking money in the non-cyclical consumer staples sector during an economic recession. This largely defensive sector has been found to have a low correlation factor with economic...
The consumer staples sector is known for its non-cyclical nature and acts as a safe haven during unstable market conditions. Moreover, like utility, consumer staples is considered a stable sector for the long term as its players are likely to offer decent returns.
Investors can consider parking their money in the non-cyclical consumer staples sector during an economic recession. This high-quality sector, which is largely defensive, has been found to have a low correlation factor with economic cycles.
Research has shown that consumer staples companies have been mostly found to outperform during market turbulences. Thus, the space generally acts as a safe haven for investors. Moreover, consumer staples stocks have more stable profit levels in a contracting economy.
Wall Street just made it through the worst month this year, with the broad market indices exiting September in the red. The Dow Jones Industrial Average was down 4.3%. Moreover, the S&P 500 index and the Nasdaq Composite declined 4.8% and 5.3%, respectively.
The weakness has been caused by a variety of factors like rising coronavirus cases due to the highly contagious Delta variant, surging inflation levels, uncertainty surrounding the Federal Reserve’s meeting and its decision on tapering the fiscal stimulus along with China’s property crisis. Notably, 10 out of 11 S&P sectors were negative, while the energy sector was positive, with more than a 9% rise in September.
Going on, market analysts are skeptical about the Wall Street performance in October. The S&P 500 index has been observed to lose 0.4% in October after losing more than 2% in September, according to a Barron’s article. October has a tarnished image of witnessing some of the biggest stock market crashes like the 1929 Black Tuesday and Thursday, and the great crash of 1987, which occurred on Oct 19. On that particular day, the Dow had tanked more than 20% on a single trading session, making it debatably the worst single-day decline in history.
October is clouded by certain issues like inflationary pressures, supply chain challenges, probabilities of Fed tapering the fiscal stimulus, China’s Evergrande crisis along with concerns about a debt-ceiling breach. These factors can keep the stock market volatile.
Consumer Staples ETFs to Watch Out For
Here we highlight certain ETFs that have gained more than 20% year to date (see: all Consumer Staples ETFs here):
The Consumer Staples Select Sector SPDR Fund XLP
The fund seeks to provide investment results that, before expenses, generally correspond to the price and yield performance of the Consumer Staples Select Sector Index. With AUM of $11.66 billion, the fund has an expense ratio of 12 basis points (bps) (read: Walmart Tops Q1 Earnings Estimates, Ups View: ETFs to Gain).
Vanguard Consumer Staples ETF VDC
The fund seeks to track the performance of the MSCI US Investable Market Consumer Staples 25/50 Index. With AUM of $5.71 billion, the fund has an expense ratio of 10 bps (read: 5 ETFs to Combat Stimulus Tapering Concerns, Virus Woes).
Fidelity MSCI Consumer Staples Index ETF FSTA
The fund seeks to provide investment returns that correspond, before fees and expenses, generally to the performance of the MSCI USA IMI Consumer Staples Index. It has an AUM of $798.8 million and charges 8 bps in fees.
iShares U.S. Consumer Staples ETF IYK
The fund seeks to track the investment results of an index composed of U.S. equities in the consumer staples sector. It has an AUM of $674.8 million and charges 41 bps in fees.
First Trust Consumer Staples AlphaDEX Fund FXG
The fund seeks investment results that generally correspond to the price and yield, before fees and expenses, of an equity index called the StrataQuant Consumer Staples Index. With AUM of $256.6 million, the fund has an expense ratio of 63 bps (read: Energy and Consumer Staples: 2 ETFs to Watch for Outsized Volume).
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Consumer Staples Select Sector SPDR ETF (XLP): ETF Research Reports
First Trust Consumer Staples AlphaDEX ETF (FXG): ETF Research Reports
Vanguard Consumer Staples ETF (VDC): ETF Research Reports
iShares U.S. Consumer Staples ETF (IYK): ETF Research Reports
Fidelity MSCI Consumer Staples Index ETF (FSTA): ETF Research Reports
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