These Consumer Staples Shine Amid Market Turmoil

Key Points

• Consumer staples outperform the slumping market, with the XLP ETF thriving as a defensive standout amid economic fears.
• The sector’s stability stems from consistent demand for essentials, bolstered by reliable dividends that attract investors in downturns.
• Investors can gain exposure via XLP or top stocks like Costco and Philip Morris, which have surged 43% and 72% over the past year.

The stock market has hit a rough patch lately, with the benchmark S&P 500 ETF NYSE: SPY sliding nearly 3% in a single week. Most sectors have followed the downward trend, rattled by rising economic uncertainty and fear. Yet one corner of the market is defying gravity: the consumer staples sector. Represented by the popular Consumer Staples Select Sector SPDR Fund NYSE: XLP, this group of steady performers has not only outperformed the broader market but also broken through previous resistance levels.

Its defensive nature is proving its worth right now, and from a technical perspective, the sector looks poised for more gains. So, what’s driving this resilience, and how can investors tap into it? Let’s dive in.

Why Consumer Staples Thrive in Shaky Times

When economic storm clouds gather and markets sell off, consumer staples often emerge as a beacon of stability. This sector includes companies that produce life’s essentials, like food, beverages, household goods, and personal care products. People buy these items no matter how tight money gets, ensuring demand stays steady even in tough times. Unlike discretionary purchases like luxury cars or vacations, staples are non-negotiable, giving companies in this space consistent revenue and earnings.

This reliability makes consumer staples a classic “defensive” investment. When growth stocks stumble, and investors prioritize capital preservation over chasing significant gains, these stocks become a safe haven. Many also offer dependable dividends, sweetening the deal when volatility spikes.

History bears this out: during the 2008 financial crisis, consumer staples weathered the storm far better than flashier sectors like technology or financials. It’s not about blockbuster growth; it’s about holding steady when everything else wobbles.

How to Gain Exposure to the Sector

There are plenty of options for investors looking to ride this wave of stability. Below, we’ll look at a top ETF for broad exposure and two standout individual stocks that have led the pack in performance over the past year.

1. Consumer Staples ETF

The XLP ETF is a go-to choice for those seeking diversified exposure without breaking the bank. With a razor-thin expense ratio of 0.09% and a dividend yield of 2.2%, it’s both cost-effective and income-friendly. Tracking the Consumer Staples Select Sector Index, XLP holds over 40 of the biggest names in the business, including heavyweights like Costco, Walmart, Coca-Cola, and Procter & Gamble. Its broad reach and passive management make it a solid pick for long-term investors aiming to dial down risk while staying in the game.

2. Costco Wholesale

Costco NASDAQ: COST has been a standout performer as XLP’s largest holding at 10.7% weighting. Over the past year, its stock has soared more than 43%, and year-to-date, it’s up 15.2% through as of Tuesday’s close. The wholesale giant’s following earnings report, due March 6 after markets close, could fuel further momentum. Analysts expect earnings per share (EPS) of $4.09, a 10.2% jump from last year, with revenue projected at $63.2 billion, up 8.15% from the prior quarter.

Costco’s knack for delivering value to budget-conscious shoppers keeps it thriving, even as economic fears mount.

3. Philip Morris International

Philip Morris International NYSE: PM has been a defensive dynamo, ranked as XLP’s eighth-largest holding with a 5.6% weighting. Its stock has surged 72% over the past year and is up nearly 31% year-to-date, making it one of the S&P 500’s top performers. Beyond its robust 3.43% dividend yield, the company’s recent earnings have lit a fire under its share price.

 On February 6, 2025, Philip Morris reported Q4 2024 EPS of $1.55, beating estimates of $1.49, with revenue of $9.7 billion topping the $9.4 billion expected. But the real spark came from its 2025 guidance: earnings of $7.26 to $7.39 per share, well above the $6.99 analysts had penciled in. While cigarette volumes dipped 2% in the Americas, a 33.4% surge in oral product shipments, led by Zyn nicotine pouches in the U.S., stole the show.

The Bottom Line

The consumer staples sector’s resilience amid market chaos underscores its timeless appeal. Whether through the diversified lens of XLP or standout stocks like Costco and Philip Morris, investors have compelling ways to anchor their portfolios. As uncertainty lingers, this sector’s blend of stability, dividends, and upside potential could be just what the market doctor ordered.