The return on defensive stocks is usually slow and steady, as are dividends if the company pays them, which can make it easier to predict how your investments will grow over time. That might be appealing if you’re working toward a specific financial goal or planning for retirement. CPG manufacturers are also keen to appeal to a value-conscious consumer. While promotions weren’t used when supply and demand were off-kilter, promotional intensity has more recently stepped up. Total CPG promotional levels jumped 10% on average over the last 10 weeks versus the same period a year ago. We see this as stemming from consumers trading down to private labels; however, this could become value-destructive if used exclusively to drive near-term volumes and market share, as such initiatives fail to reinforce brand standing.

1. Its top three holdings are Keurig Dr Pepper, Kraft Heinz and Mondelez International.
2. This sector includes companies that offer communication services through cellular, fiber-optic, fixed-line, wireless, and high-bandwidth networks.
3. Consumer staples stocks typically experience modest, albeit, steady growth.
4. However, we see opportunities in tobacco and alcoholic beverages, which in the aggregate trade 14% and 10%, respectively, below our valuations.

We think investors should give wide-moat Anheuser-Busch InBev a look, trading more than 30% below our assessment of intrinsic value. After its dividend cut, we believe the firm is now poised to pay down debt and enhance its financial flexibility. We hire mariadb developers see growth opportunities for AB InBev in emerging markets, such as Africa and Latin America. Prefer to invest in the consumer staples sector via a ready-made portfolio? Syfe’s Core portfolios hold the XLP ETF as part of their diversified holdings.

The services segment includes hotels, restaurants and leisure facilities, media production and related services, and consumer retailing and services. The stock shares of consumer discretionary companies tend to lead a general stock market decline at the beginning of a contraction. Interest rates can be an interesting metric to follow during all types of economic cycles. In general, interest rates rise in growth phases and fall during contractions. The level of interest rates is important for companies that tap the credit markets for business funding. U.S. monetary policy usually seeks to lower interest rates in contractionary phases to provide a business stimulus.

What stock sectors are considered defensive?

We think the digital channel remains an area of opportunity for consumer goods firms, as e-commerce penetration has been steadily increasing over the past decade. Retail spending through e-commerce grew 17.3% for the third quarter of 2019, far surpassing the 4.4% growth https://traderoom.info/ in total retail spending (Exhibit 3). Mr. Ben Becker is a Senior Analytics Product Specialist at FactSet based in Chicago. In this role, he is responsible for implementing and supporting Analytics clients, specifically in the portfolio analysis and quantitative space.

Potential drawbacks

For instance, biotechnology is an attractive sub-sector of the health sector because of its movement; this is a field with constant innovation. However, if a fund invests in this sub-sector and no others, a decline could result in an outsized decline in the value of your holdings. Choosing defensive stock funds with holdings in a variety of sub-sectors within a given sector can make for less severe losses during a downturn. You can purchase defensive sector mutual funds or ETFs through a brokerage or investment firm. Before you bring these funds into your portfolio, figure out your asset allocation, or how your money will fall into different asset classes like stocks and bonds. Then, set up the portion of your portfolio that each asset class should represent so that your choice of stock will not be a disproportionate amount of the overall scheme.

Where Will Sysco Corp (SYY) Stock Go Next After It Has Gained 9.13% in a Week?

It has $691.74 million in assets, while its net expense ratio is 0.43%. Typically, gross domestic product (GDP) is the number one metric for analyzing an economy. When GDP is growing, it indicates a strengthening economy where people and businesses are willing to spend more. Conversely, when GDP is decreasing, it is an indication of economic contraction and the need for spending prudence.

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Tyson’s ongoing productivity efforts should enhance long-term efficiency and support margin recovery as well. Defensive sector funds refer to mutual funds or ETFs that mainly (or only) invest in the stock of companies that tend to remain stable through all phases of the economic cycle. Defensive stocks are also known as noncyclical stocks because they are not highly correlated with the business cycle. He’s been looking for companies that may hold up best, within the sector, under the combined pressures of a softening economy and rising input prices.

As any experienced investor knows, there’s no single investment type that performs best across all market environments. There will be times when tech, energy, growth, and value stocks each takes the lead, and times when each of these sectors and styles lags. One unknown—for both 2024 and the longer term—may be the impact of the new weight-loss drugs. How many people will take these drugs and what their effect on sales will be is not yet known. Packaged foods and soda companies may be the most at risk, whereas household products companies and retailers may be less exposed.

It has $295.61 million in assets, while its net expense ratio is 0.63%. FDAGX normally invests a minimum of 80% of its assets in companies that manufacture, sell or distribute consumer staples. FDAGX has given a return of 10.42% over the past three years, and 6.77% over the past five years. IECS normally invests at least 80% of its assets in the U.S. listed small, mid and large-cap consumer staples companies. It has $14.83 million in assets, while its net expense ratio is 0.18%. The term describes products and services that are desirable for consumers, but not essential to their daily living.

After all, health is a primary concern, and people still visit doctors and refill their prescriptions even when they can’t afford other goods. In addition to health care, the utilities and consumer staples sectors are also considered to be defensive sectors. As investors might expect, each sector has performed better than the broad market through the volatility we’ve seen over the past year. At the same time, fundamentals at many companies were squeezed by a challenged consumer.

During tough times, consumers will reduce spending on luxury items, such as entertainment, travel, and high-end clothing. Instead, they tend to buy only necessities such as food, healthcare services, and basic utilities. If you purchase defensive stock funds that invest in industries like these, your holdings should, in theory, decline less than others. That is because the assets that make up your fund are stocks that have historically remained steady in price during market declines.

They are defensive because consumers still need them during an economic decline. This fact makes the prices of defensive utility stock funds less sensitive to market fluctuations. Vanguard Utilities ETF (VPU) is an example of this kind of defensive sector fund.