- Consumer staples and discretionary stocks have similar valuations, but rising consumer debt suggests rebalancing towards staples is less risky.
- Staples have better earnings to revenue growth which indicates higher competitiveness and M&A activity in the discretionary sector.
- In the case of an economic pullback, discretionary stocks would be hit harder as M&A activity will prove too expensive at valuations above 24.
With most of the earnings in and the S&P 500 down in the last two weeks, it’s good to take a look at the consumer goods sector to find potential defensive investments. The iShares Consumer Goods ETF (NYSEARCA: IYK) has enjoyed a wonderful run in the past 7 years. More →