Take a look at a market heatmap and you’re going to see a lot of red in the so-called high-flying tech names. Today’s action shouldn’t surprise given the what we’ve seen thus far in 2014, but as summer approaches investors may have a safer way to capture return minus all the volatility.
Instead of say, shoving money into money market fund, Tom Lydon of ETFTrends.com has a top trade to put your cash to work this summer.
When you think about summer, Lydon says, one of the things we all depend on is consumer staples. “People are buying paper plates, beer, toothpaste – those categories have done very well so far this year, and historically during the slow months of May through October they’ve outperformed on an annualized basis.”
The concern for buying the staples sector is that investors would then be tied to a consumer that hasn’t been feeling too hot over the past five years. Lydon says the rebound will be powered by the fact that we’re now finally thawing out from the economy-crushing winter freeze.
“Investors and purchasers have been in hibernation, they haven’t able to [spend], the weather’s been so bad. So now you’re starting to see an inclination of better home-buying, auto [purchases]… I think in the next 30 days we’re going to see some numbers that look favorable in that area.”
From an earnings season point of view, Lydon says we may see a little dip after numbers are reported, but that could be a buying opportunity. “People are going to get back to work, you’re going to have to because of the cold season, because of all the rain… [Staples will be] safer bets than some of these high-flying tech stocks.
Lydon says his preferred way to play consumer staples is with the Staples Select Sector SPDR ETF (XLP).
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