Consumer staples are companies that create products considered essential by consumers. These are products that people are unable — or unwilling — to cut out of their budgets regardless of their financial situation. Hence, they are expected to be impervious to business cycles. Consumer staples stocks are often referred to as non-cyclical or defensive stocks (https://www.investopedia.com/terms/c/consumerstaples.asp).
I examined recent stock market trends to determine if this dynamic still holds. That is, do consumer staples still provide a defensive shield relative to other sectors through economic cycles. I sought to answer the following questions.
- What is the correlation of the consumer staples sector returns to nominal GDP growth. How does this stack up vs the correlation of other sectors returns to GDP?
- What is the sensitivity (beta) of the consumer staples sector to GDP. How does this compare to the sensitivities of other sectors to GDP?
-How has the risk/return profile of the consumer staple sector vs other sectors evolved over time, relative to GDP growth?
Collection of Data
The indices “^SP500–30”, ‘^SP500–4010’, ‘^NDXT’, ‘^GSPC’, ‘^SP500–25’ were used as proxies for the Consumer Staples, Banking, Tech, Broad Market, and Consumer Discretionary sectors respectively.
Timeframe: 2013–01–01 to 2023–11–13
Methodology
