Consumer Switch – Sell Consumer Discretionary, Buy Consumer Staples
ByConsumer Staples Outperforms Apr 23 to Oct 27
The consumer switch strategy essentially rotates between the consumer discretionary and staples sectors. During the favorable six months the consumer allocation is placed in the discretionary sector and during the unfavorable six months it is placed in the staples sector. The switches are continue every April 23rd and October 27th. This strategy has worked very well over the long-term. The results of the last two time periods are shown below. We are approaching the date to switch into the staples sector (April 23).
Consumer Staples – From April 23 to Oct 27
We are approaching the switch date to buy into the staples sector. In the U.S. investors should consider using the ETF, XLP.
Last year the staples and discretionary sectors were flat into June, it is only in the bad summer months that the staples sector outperformed. Although the staples sector was down 20% in late October, this was better than the market’s drop (S&P 500) of 35% and the discretionary’s sector drop of 39%.
Consumer Discretionary – From Oct 27 to Apr 23
Over the last cycle the consumer staples sector has outperformed and underperformed the more conservative staples sector.
It has largely depended on the direction of the market. When the market was heading higher, the discretionary sector outperformed. When the market was heading lower the staples sector outperformed. Since the last rally in early March the discretionary sector has outperformed by more than 12%.
