Book Profits in Overvalued Consumer Staples
NEW YORK ( TheStreet) -- The consumer staples sector covers what consumers eat, drink, smoke, clean with and use to primp their bodies. It includes supermarkets, drugs and some Big Box retailers. These companies' stocks have been popular choices for investors seeking safety, since consumers still must buy and use products considered necessities.
Last Tuesday, the Conference Board's reading on the Consumer Confidence Index came in better than expected at 65.9 in July, but this reading remains well below the neutral zone of 90 to 120 for this measure.
On the same day, the personal spending report for June showed no growth for the second month in a row. This is not data that can sustain the stock strength seen in the consumer staples sector.
A great benchmark for the consumer staples sector is the
Consumer Staples Sector SPDR Fund
(XLP), which contains 41 stocks including four in alcoholic beverages, five in soft drinks, 13 in food, two drugstores, four supermarkets, three soap producers, four tobacco companies and two cosmetics companies. These companies all make products consumers use regardless of the economic times.
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