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Top-Performing Consumer Staples ETFs This Year

Sweta Jaiswal, FRM

When most of the sectors have been grappling with market uncertainties stemming from the ongoing Sino-US trade war, the consumer staples sector has been keeping strong so far. In fact, the S&P 500 Consumer Staples (Sector) index has gained 19.4% year to date. Like utility, Consumer Staples is considered a stable sector for the long term as its players are likely to offer decent returns. It is known for its non-cyclical nature and often acts as a safe haven during erratic market conditions (read: Best and Worst Performing ETFs of Last Week).

Factors Driving the Sector

Escalating trade war tensions between the United States and China have been increasing the appeal of consumer staples stocks. This is because the sector generally acts as a safe haven amid political and economic turmoil. Stocks in these sectors generally outperform during periods of low growth and high uncertainty.

Retaliating to President Trump’s early August attack, China imposed new tariffs of 5% to 10% on $75 billion worth of U.S. goods, effective on some items from Sep 1 and others from Dec 15. The raised duties will be levied on nearly 5,078 U.S. products, including agricultural goods like soybeans and coffee along with whiskey, seafood, aircraft and crude oil. Trump responded by raising tariffs on $550 billion worth of Chinese goods. He lifted existing tariffs to 30% from 25% on $250 billion of Chinese imports effective Oct 1.  Moreover, tariffs planned on a further $300 billion in Chinese goods will be revised to 15% from 10% in two stages — Sep 1 and Dec 15 (read: 4 Dividend ETFs to Ride Out Trade War Uncertainty).

Moreover, the U.S. central bank has enacted its first rate cut since 2008 in July 2019. This is likely to lower bond yields and favor consumer staples ETFs. Also, there are talks that the Fed may cut rates in September. With falling rates, a rate-sensitive sector like Consumer Staples has every reason to outperform. These sectors are high-yielding in nature and should thus perform better in a low-rate environment.

Also, considering the current global growth scenario, geopolitical tensions and Brexit issues, investors demand for safer options like consumer staples funds may rise.

Consumer Staples ETFs Up 20% or More

The trends have been benefiting consumer staples ETFs. Here we highlight certain ETFs that have gained more than 20% year to date:

iShares Evolved U.S. Consumer Staples ETF IECS— up 22.1% year to date

The fund provides access to U.S. companies with consumer staples exposure. It holds 123 stocks in its basket and has 0.18% in expense ratio. It has accumulated $8.4 million in its asset base (read: Consumer Staples ETFs Beating Discretionary ETFs: Why?).

The Consumer Staples Select Sector SPDR Fund XLP— up 21.5%

The fund tracks the Consumer Staples Select Sector Index. It provides exposure to companies from the food and staples retailing, beverage, food product, tobacco, household product and personal product industries in the United States. The fund holds 33 stocks in its basket and has 0.13% in expense ratio. It has accumulated $13.21 billion in its asset base (read: ETF Strategies to Follow as Volatility Seems Underpriced).

Invesco S&P 500 Equal Weight Consumer Staples ETF RHS — up 21.1%

The fund is based on the S&P 500 Equal Weight Consumer Staples Index. The index equally weights stocks in the consumer staples sector of the S&P 500 Index. The fund holds 33 stocks in its basket and has 0.40% in expense ratio. It has accumulated $447.1 million in its asset base.

Fidelity MSCI Consumer Staples Index ETF FSTA — up 20.9%

The fund invests at least 80% of assets in securities included in the MSCI USA IMI Consumer Staples Index. It holds 89 stocks in its basket and has 0.08% in expense ratio. It has accumulated $616.5 million in its asset base (read: 5 ETFs to Gain From Walmart Strength Post Q2 Results).

Vanguard Consumer Staples ETF VDC — up 20.2%

The fund seeks to track the performance of the MSCI US Investable Market Consumer Staples 25/50 Index. It holds 92 stocks in its basket and has 0.10% in expense ratio. It has accumulated $5.38 billion in its asset base.

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