Download the Schwab app from iTunes®Close

Consumer Staples Sector Rating: Marketperform

What is the consumer staples sector?

It includes food, beverage and tobacco products, non-durable household goods and personal products, and food and drug retailers.

The Consumer Staples sector historically has outperformed during periods of economic slowdown and uncertainty, as investors are attracted by the perceived relative stability of the group. After all, consumers tend to buy food, soap and cleaning supplies regardless of economic conditions.

On the positive side, retailers within the sector have aggressively cut costs, leaving them in reasonable condition to deal with limited pricing power and less–than-exciting top line growth. However, COVID-19 related social-distancing behaviors continue to bolster grocery, big-box discount retailers and household goods sales, resulting in few negative earnings revisions and supporting the fundamental outlook, though some of the food wholesalers that service restaurants continue to face headwinds. While our current view is for interest rates to remain low, which is a positive, the sector’s low sensitivity to the overall market would be a drag if the market continues to rally—leaving the macro factors at negative. Indeed, we’ve seen the sector trail the market since the low in March 2020. With this underperformance, the sector’s relative valuations have improved, and are now counted as a positive. Additionally, exuberance in other growth-oriented sectors opens up the possibility that the defensive characteristics of Consumer Staples could lead to outperformance if there should be a rotation out of those other sectors.

Overall, we have a marketperform position to the Consumer Staples sector.

Sector Overview: Consumer Staples

consumer staples

Note: Each of the sector lenses shown above—Macroeconomic, Value, Fundamental and Relative Strength—is both intuitive and evidenced-based in nature. Within each, there are a varying number of factors. The Macroeconomic lens includes sector sensitivities to interest rates, stocks and the value of the U.S. dollar; the outlook for each of these is determined by the Schwab Center for Financial Research (SCFR)’s Asset Allocation Working Group, which uses a mosaic approach of quantitative and qualitative considerations. Value includes six different valuation metrics that provide a holistic perspective on current valuations relative to each of the sectors’ own historical valuations, as well as relative to the other sectors. Fundamental provides insight as to how efficiently the companies within each sector use invested capital to produce earnings; this historically has been informative as to future relative performance of the sectors. Finally, Relative Strength measures momentum of the individual sectors against all of the other sectors. We also consider the data in the context of factors outside the scope of these indicators—for example, geopolitical risk or central bank policy changes.  

Source: Charles Schwab, as of 09/10/2020

What do the ratings mean?

The sectors we analyze are from the widely recognized Global Industry Classification Standard (GICS®) groupings. After a review of risks and opportunities, we give each stock sector one of the following ratings:

  • Outperform: likely to perform better than the broader stock market*
  • Underperform: likely to perform worse than the broader stock market
  • Marketperform: likely to track the broader stock market

 

Want to learn more about a specific sector?  Click on a link below for more information or visit Schwab Sector Views to see how they compare. Clients can log in to see our top-rated stocks in the Consumer Staples sector.

 

* As represented by the S&P 500 index

Communication Services Industrials
Consumer Discretionary Information Technology
Energy Materials
Financials Real Estate
Health Care Utilities

 

What You Can Do Next

Real Estate Sector Rating: Marketperform
Utilities Sector Rating: Underperform

Important Disclosures

Schwab Sector Views do not represent a personalized recommendation of a particular investment strategy to you. You should not buy or sell an investment without first considering whether it is appropriate for you and your portfolio. Additionally, you should review and consider any recent market news. Supporting documentation for any claims or statistical information is available upon request.

All expressions of opinion are subject to change without notice in reaction to shifting market or other conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.

Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly. For more information on indexes please see www.schwab.com/indexdefinitions.

Past performance is no guarantee of future results and the opinions presented cannot be viewed as an indicator of future performance.

Investing involves risk including loss of principal.

The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc.

(0920-0C5Y)

Thumbs up / down votes are submitted voluntarily by readers and are not meant to suggest the future performance or suitability of any account type, product or service for any particular reader and may not be representative of the experience of other readers. When displayed, thumbs up / down vote counts represent whether people found the content helpful or not helpful and are not intended as a testimonial. Any written feedback or comments collected on this page will not be published. Charles Schwab & Co., Inc. may in its sole discretion re-set the vote count to zero, remove votes appearing to be generated by robots or scripts, or remove the modules used to collect feedback and votes.