Top Charts from the Consumer Staples Sector - 12/8/2023
Not much going for the Staples. But that's not so bad.
The Consumer Staples sector has been one of the worst performers all year, and things aren’t likely to get better any time soon.
As things stand today, no S&P 500 sector has fewer members in long-term uptrends. Just 21% of Consumer Staples stocks are above their 200-day moving average, roughly half the number of the next-worst sector (Energy at 39%) and just one-third of the mark set by the S&P 500 ex-Staples.
A look at the sector’s performance over the last few years is uninspiring. Price is rangebound between support at the December 2020 highs and resistance at the January 2022 peak.
Stripping away the outsized influence of the largest components, paints a somewhat darker picture. The equally weighted Consumer Staples sector is rebounding after breaking to multi-year lows, but is stuck below former support. We have to treat this group as guilty until proven innocent.
It doesn’t help that the sector is about to enter its weakest seasonal period. The Staples have lagged the benchmark index by an average of 1.3% in Januarys since 1990 and outperformed the index just 32% of the time during that month.
To be clear, a Consumer Staples sector that’s underperforming isn’t a bad thing. Staples tend to lag during bull markets, when investors favor more expensive stocks with higher earnings growth potential. When the money starts flowing disproportionately into boring companies that sell diapers and toothpaste, it’s a sign that investors are becoming more risk-averse.
Since we’re in the midst of a bull market in stocks, the Staples should be lagging. And they should continue doing so. We’re watching the chart below, which compares the sector to the benchmark index. If investors continue to favor risk-on areas of the market, we expect this ratio to break to new lows. A significant rally from support, though, would force us to question how much risk-appetite investors really have.
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