Consumer Staples: Definition, Role in GDP, and Examples

Then you can look at how that impacts spending in different types of products and services in the economy. Owning equities that can correlate better with inflation, like consumer staples, is just one step. The biggest risk is generally not the cash flows declining over time – central banks will always target an inflation rate of at least zero to avoid deflation – but rather the interest rates going up. Consumer staples companies like Proctor & Gamble raised their prices on consumers to handle the inflationary pressure.

  1. Some analysts predict the trend will result in single-digit sales declines for foodmakers over the next 10 years.
  2. Among the best positioned for 2024 may be household products companies, due to sticky pricing, positive trends on sales volumes, and earnings flexibility.
  3. Financial ratios, such as the Price-to-Earnings (P/E) ratio, serve as a lens into a stock’s valuation, with a higher P/E potentially indicating optimistic growth expectations.
  4. Consider consulting with a financial professional before choosing how to invest in the consumer staples market.
  5. Conversely, if stocks fall in price and if the dividend payout does not change, then the dividend yield increases.

The rate of dividend taxation is determined by your income tax bracket, with rates spanning from 0% to 20%. Utilities are considered their own sector outside of consumer staples, though they have staples-like properties. Owning consumer staples could also become challenging if policy tightening coincides with organically slowing growth and inflation.

Explore Consumer Staples

PG has leading market share in several important categories, including diapers and laundry detergent. The company also has a solid operating margin of 22.6% over the prior 12 months. For context, the same metric for competitors Colgate-Palmolive (CL) and Kimberly-Clark (KMB) is 20.9% and 14.9%, respectively. In its first quarter of fiscal 2024, PG reported $21.9 billion in net sales, up 6% from the prior year.

S&P 500 Consumer Staples

As the cycle goes on, getting the mix right between growth and price stability is hard. That’s borderline intolerable when it comes to your life savings, so diversification fusion markets review is a key element to any portfolio strategy. We can increase our reward relative to our risk by balancing sector weights in a more efficient way.

Best Consumer Staples Stocks of January 2024

Consumers generally buy these products regardless of their financial situation or economic stability. Consumer staple stocks stand out as pillars of stability, offering low volatility, inelastic demand and attractive dividend yields. From household names like Nestlé and Procter & Gamble to stalwarts like Colgate-Palmolive, these companies provide enduring value and brand loyalty. While acknowledging limited growth potential and susceptibility to regulatory changes, strategic investors can leverage comprehensive analysis and tax-efficient strategies to fortify their portfolios. With their resilience in market fluctuations and consistent returns, consumer staples are essential assets for long-term investing success. The consumer staples sector refers to the list of consumer staples stocks, including companies that produce or sell products that consumers regularly purchase, regardless of economic conditions.

Why Stocks Are Poised To Soar Again In 2024

This was significantly better than the S&P 500, which lost about 35 percent. And better than assets like small caps, which lost about 46 percent in just a few weeks. But as long as the losses in income aren’t substantial, the level of interest rates isn’t as important. Beverages stocks are companies that make bottled and canned drinks, such as pop and bottled water. Finally, many water stocks also fall under the broader category of beverage companies. Finder monitors and updates our site to ensure that what we’re sharing is clear, honest and current.

Consumer staples, like food, water and personal items, are necessary for daily living. These are considered staple products because people will continue purchasing them, even during economic downturns. The consumer staples sector has a long history of steady and consistent growth.

This suggests that inflation is a key concern for many consumer staples companies this year. While no stock is completely immune to market volatility, consumer staples stocks tend to decline much less during corrections. At this time of writing, the broad-based S&P 500 index has slipped nearly 7% in the year to date, but the S&P 500 consumer staples sector is only down 4% for the same period. The ubiquity of the consumer staples sector provides a wealth of opportunities for investors, especially those looking to add a level of stability to their portfolio. Some of the opportunities and market trends that have caught investor attention lately include the following. After identifying a few essential companies you should invest in, narrow your search by reviewing financial information.

Utilities, a separate sector that’s staples-like in nature, goes under IXU on Globex. From breaking news about what is happening in the stock market today, to retirement planning for tomorrow, we look forward to joining you on your journey to financial independence. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people around the world achieve their financial goals through our investing services and financial advice. Our goal is to help every Canadian achieve financial freedom and make all levels of investors smarter, happier, and richer. This article contains general educational content only and does not take into account your personal financial situation. Before investing, your individual circumstances should be considered, and you may need to seek independent financial advice.

Most portfolios also typically don’t own commodities, which will tend to do well in an inflationary environment. As this starts to happen, you’ll generally see rotation in the stock market. This includes measures like raising interest rates and slowing down purchases of bonds and other assets that they do as part of the QE programs.

Investing in consumer staple stocks may provide diversification benefits to your portfolio. Investing in various consumer staple companies can diversify your portfolio and potentially reduce risk. If you’re looking to invest in the stock market, you may have heard the term «consumer staples stocks.» Because of how essential consumer staples are in our lives, these stocks tend to be less volatile than other sectors. Below we’ll look at some top opportunities in Canada’s consumer staples sector and see if these stocks have a place in your portfolio.

Not every firm will be able to raise their prices (to protect profit margins) without losing too many customers. Companies without strong brand loyalty are susceptible to consumers switching brands, a trend that intensified during the pandemic. MarketBeat keeps track of Wall Street’s top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on… Using a single purchase, you can use a consumer staples index fund, mutual fund or ETF to invest in various consumer staples.

Financial advisors would recommend that non-professional investors take a diversified approach. Rather than buying individual stocks, experts suggest choosing a well-diversified consumer discretionary index fund or exchange-traded fund (ETF). Use the fund screener tools available on your brokerage platform to find the best options. Access to our research can help you better understand the industries and companies that make up this sector, with timely performance data and stock, mutual fund, and ETF screeners. STZ also consistently generates more than $2.5 billion in cash from operations annually. The company has been transparent and disciplined in its use of that cash.