U.S. consumers are reducing spending on staples such as toothpaste, laundry detergent, and toilet paper. The bad news for investors is that consumer staples stocks, seen as a safe haven as the economy slows and inflation continues above 3%, aren’t a safe as assumed in so many portfolios.
With Walmart (WMT) shares down 7.74% as of noon New York time today, July 26, on the company’s warning yesterday about falling revenue, the pool of safe consumer stocks continues to shrink. Which is bad if you owned Walmart or Dollar General (DG), also down today (by 1.88%.) But good (so far) if you owned Coca-Cola (KO) or McDonald’s (MCD), which on the evidence of today’s earnings report are surfing the recession in decent shape. Shares of Coca-Cola were up 1.58% and shares of McDonald’s (MCD) were up 2.51% as of noon.
My one-hundred-and-fifty-first YouTube video “Position Your Portfolio for the Recessioin–But What Kind of Recession”” went up today. I see it like this: How you should position your portfolio for the coming recession depends largely on how bad you think it will be. Already, we can see that different sectors of the economy will do better than others. For example, consumer staples seem like a good bet if we think the recession will be relatively mild, but if the recession gets worse, they won’t be immune either. Take a look and tell me what you think.
Back on April 11 when I “trimmed” my bank stock positions in my Jubak Picks Portfolio ( https://jubakam.com/trimming-bank-st…wfc-and-kbwb-etf/) by selling Wells Fargo (WFC) and the Invesco KBWB Bank ETF, I said I’d sell that ETF out of my Perfect 5 ETF Portfolio when I had a replacement ETF to offer. Today I’ve got a replacement to recommend and I’m selling the Invesco Bank ETF out of that portfolio. The replacement is the Consumer Staples Select Sector SPDR ETF (XLP).
Stocks rose today, December 10, as a huge jump in CPI inflation exactly matched economists’ projections. As they say on the basketball court, “No surprise; no foul.” The Consumer Price Index (CPI) climbed at a 6.8% annual rate in November.
I left my keyboard at 11:30 this morning to go for a walk in my neighborhood. The temperature was near 60 degrees in New York City. The sun was out. Restaurants with outdoor space were full. Columbia and Barnard students were out in skirts and even a few tank tops. There seemed to be more folks on the street than in recent days. I returned to work with spirits high. Ready to buy a stock or two. (I added some Disney (DIS) call options for June 18 at a strike of $200.) Confident that the worst of the pandemic was behind us. (Whether that’s true or not is a matter for a colder and rainier day.) Ready to believe that the economy and life were on the road back to normal. Don’t discount the role of “animal spirits,” the optimism that comes with warmer weather, a return to the outdoors, and an end to some (or in some states all) pandemic restrictions in moving stocks.
