On a total-return basis (price change plus dividends), consumer staples outperformed the S&P 500 during the Great Recession (-29% to -55%), 2020 COVID crash (-24% to -34%), 2022 bear market (-9% to -21%). And those were just sector averages; some individual names performed even better. If you’re looking to invest in the stock market, you may have heard the term „consumer staples stocks.” Although the economic outlook remains uncertain, consumers are likely to continue to need the everyday products—from toothpaste to toilet paper— that staples companies produce and sell. When exactly sales volumes pick up may depend on the health of the consumer and economy.
What is consumer discretionary spending?
High inflation may well be here to stay — and it may force some consumers to reconsider nonessential purchases. Even when the consumer price index (CPI) is off the charts, people still have to get groceries. I believe that companies with attractive valuations and strong pricing power may offer the strongest returns potential for 2024. Companies that can raise prices or hold them steady may be more likely to meet their profit-margin forecasts.
What is a consumer staples index fund?
Investing in a consumer staples index fund is an easy way for investors interested in the general sector of the market to gain instant, diverse exposure. Instead of hand-selecting a few stocks alpari review that you think will perform well, consumer index ETFs and mutual funds allow you to invest in all the sector’s top performers quickly. In contrast, consumer discretionary companies face a more volatile profitability environment. Their profitability is susceptible to fluctuations in input costs, particularly raw materials, and the intense competitive dynamics within the discretionary market. As consumer preferences shift and new entrants emerge, profit margins can narrow, leading to more volatile earnings performance. This volatility reflects the cyclical nature of the consumer discretionary sector, where profitability is closely tied to the overall health of the economy and consumer spending patterns.
Analyze industry trends and stay informed
This contrasting correlation with economic factors underscores consumer staples’ and discretionary stocks’ distinct investment profiles. Consumer staples are products people need to buy regardless of economic conditions, making the sector relatively stable. Additionally, companies producing these products often have established brand names and loyal customer bases, protecting against the competition. On the other hand, the growth potential of consumer staple companies may slow down and be vulnerable to changes in consumer preferences or regulatory changes. Buoyed by the persistent demand of their products, consumer staples companies generate consistent revenues, even in recessionary periods.
A staple of any investor’s portfolio
Information is provided 'as-is’ and solely for informational purposes, not for trading purposes or advice, and is delayed. These 10 simple stocks can help investors build long-term wealth as artificial intelligence continues to grow into the future. RSPS has been able to amass assets over $304.66 million, making it one of the average sized ETFs in the Consumer Staples ETFs.
Our partners cannot pay us to guarantee favorable reviews of their products or services. Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more – straight to your e-mail. Technical analysis, with tools How to buy hot coin like moving averages, Relative Strength Index (RSI) and support and resistance levels, further enriches the evaluation process. Moving averages identify trends, with an upward trend indicating a positive trajectory. The RSI measures the speed and magnitude of price movements, providing insights into potential overbought or oversold conditions. Invesco S&P 500 Equal Weight Consumer Staples ETF is a reasonable option for investors seeking to outperform the Consumer Staples ETFs segment of the market.
- The consumer staples sector also often lures investors with its components’ rich dividend yields, which tend to be larger than those generated in other sectors.
- ETFs also offer diversified exposure, which minimizes single stock risk, though it’s still important for investors to research a fund’s holdings.
- These are considered staple products because people will continue purchasing them, even during economic downturns.
- While you can buy and sell individual stocks in the consumer staples sector to invest in these assets, you also have the option to invest in a „basket” of these stocks using a consumer staple index fund.
- More often than not, Large Cap Blend mutual funds invest in companies with a market cap of over $10 billion.
However, valuations in the sector remain compelling, especially given the potential for improving profit margins. On the other hand, the slower nature of the sector may make it less appealing to aggressive investors who are looking to take on a higher degree of risk in return for greater potential rewards. Investors seeking rapid earnings growth are unlikely to find it in consumer staples. Companies in the consumer staple sector are responsible for funding and undergoing all FDA requirements needed to ensure that products are accurately labeled and safe. While regular testing and oversight is an essential protection for consumers, investors should seek out companies with a consistent history of adherence to labeling and product quality guidelines. Consumer staples index funds may be a good choice for investors looking for long-term investments that are likely to show lower levels of volatility.
As a result, consumer staples stocks are considered defensive investments that can help balance a portfolio and provide a spreadex forex broker review source of stability and income. When you talk about consumer staple stocks, you refer to the consumer staples sector, which groups all the consumer staple stocks. One of the primary reasons is that consumer staples are considered essential products that people need regardless of economic conditions. Consumer staple companies are less likely to be affected by economic downturns than companies that produce nonessential products.
