Consumer staples just had a big week—some say the best is behind them

Consumer staples stocks just had a banner week, but some money managers aren’t so optimistic the trend is sustainable.

The sector surged 4 percent last week as the market’s biggest gainer, posting its best week since late 2011. By comparison, the S&P 500 closed out the week barely positive.

The traditionally defensive group benefited in part from blowout earnings from Procter & Gamble, which reported its biggest quarterly sales gain in five years. Investors turned to the group earlier in the week, too, amid broad market volatility.

This move is merely reflecting “risk-off” flows into a defensive space, said Mark Tepper, CEO of Strategic Wealth Partners.

“We certainly would not be adding to our positions right now. These are all multinationals, and trade tensions can certainly hurt future earnings. The stocks aren’t cheap; the sector’s trading around maybe 20 times forward earnings, so we do not think that there’s more gains ahead for this sector,” Tepper said Friday on CNBC’s “Trading Nation.”

He noted the group is still down nearly 4 percent this year, underperforming the market.

From a technical perspective, consumer staples may run into some technical headwinds in the near term, said Blue Line Futures president Bill Baruch. He examined a chart of the consumer staples-tracking exchange-traded fund, the XLP, on Friday on “Trading Nation.”

“The XLP has been pretty constructive for the second half of the year. In fact, you’ve got a golden cross recently, and now you have the 100-day moving average looking to move above the 200 [day moving average]. But here’s my problem. … You have a trend line that’s coming in right [around the $55 level], and that’s going to pose a lot of resistance. Even today’s move that’s above the 50-day moving average and above a retracement level is going to run into a brick wall up there,” Baruch said. He said he also thinks volatility is set to exit the broader market, and staples may then fall out of favor.

He said he’d consider buying the XLP in January if the chart remains “this technically constructive.”

The XLP closed 2 percent higher on Friday, at $54.69 per share.

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