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Key Takeaways
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Consumer staples companies have been outperforming the broader market in recent weeks.
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They're likely to continue attracting attention from investors if economic conditions and policies remain volatile, UBS analysts said.
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Staples stocks were among the S&P 500's stronger performers Monday.
Investors who have lately turned to consumer staples as a defense against volatility may do so for a while, UBS analysts said.
The Consumer Staples Select Sector SPDR Fund (XLP), which tracks staples companies, has outperformed the S&P 500 since late February, rising more than 6% over the past month as the broader index fell. XLP includes businesses that manufacture and sell food, beverages and other household goods, which can appeal to investors seeking to hedge against uncertainty.
A “flight to safety” isn’t surprising, UBS analysts said, despite concerns that strong revenue in the sector may no longer be a given. Spending trends have moderated in recent weeks, which could be a reaction to poor weather and other temporary dynamics—or a sign of “things to come,” the analysts wrote Monday.
That said, other trends—including some lower commodity prices and a weakening dollar—may shore up bottom lines, the analysts wrote in another recent note.
Investor enthusiasm for the sector is unlikely to wane "with many now believing that as long as volatility/uncertainty persists in the market, there will be greater interest in Staples irrespective of fundamentals," UBS analysts wrote Friday.
Staples stocks were among the S&P 500's stronger performers Monday. The Archer-Daniels-Midland Company (ADM), which sells ingredients for human and pet food; Brown Forman (BF.B), the company behind Jack Daniel’s; and McCormick & Co. (MKC), known for spices and sauces, were up about 3 to 4%. Meanwhile, the S&P 500 was off 2%.
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