Buy These 5 Top Consumer Staples Stocks Ahead Of Q3 Earnings
Zacks Investment Research | Oct 27, 2019 10:34PM ET
Wall Street suffered from severe volatility in the third quarter of 2019 as trade tensions between the United States and China heightened. Global economic slowdown intensified owing to lingering trade conflict between the two largest trading countries of the world.
Against the backdrop of several economic and financial hurdles, market participants are keenly watching third-quarter 2019 earnings of U.S. corporates.
Third Quarter at a Glance
Wall Street witnessed continuation of the bull run at the start of the third quarter. However, the rally ended in August owing to inversion of the government bond yield curve, which is believed to be a sign of an impending recession. Trade jitters, yield curve inversion and global economic slowdown, especially in the Eurozone, significantly dented investors’ confidence.
Moreover, geopolitical conflict in the Middle East between Iran and Saudi Arabia, and the drone attack on Saudi Arabia’s largest oilfield caused a temporary oil shock. Meanwhile, Brexit-related problems continued and political turmoil in Italy injected volatility in the stock markets.
As far as the United States is concerned, several economic data were mixed, which confused economists and financial experts. However, as a major relief to the market, the Fed reduced the benchmark interest rate by 50 basis points in two tranches during the third quarter. Notably, the rate was cut for the first time in more than a decade.
Why Consumer Staples Stocks?
The consumer staples sector includes companies that provide necessities and products of daily use. This makes the sector defensive in nature. So, this has always been the go-to place for investors, who want to play it safe during extreme market fluctuations.
Adding stocks from the consumer staples basket lends more stability to portfolios in an uncertain market condition. Moreover, the sector remains a lucrative space for income-seeking investors given its strong dividend yield.
Notably, year to date, the Consumer Staples Select Sector SPDR (XLP) has gained 20.3%, almost in line with the broad-market S&P 500 Index’s rise of 20.6%. However, during third-quarter 2019, when volatility, XLP gained 6.2% compared with the benchmark index’s increase of just 1.2%.
Our Top Picks
We have narrowed down our search to five consumer staples stocks that have gained in the past six months. Each of these stocks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy) and has a positive Zacks Investment Research
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