BMO Capital warns on consumer staples

  • BMO Capital Markets analyst Brian Belski says while consumer staples stocks have fared significantly better than the broader market throughout much of the COVID-19 sell-off,  he notes as the S&P 500 has started to recover the sector has been a notable laggard.
  • "From our perspective, we would caution longer-term focused investors from piling into Consumer Staples as the sector’s backdrop of elevated valuations, rising leverage, dwindling dividend yield spreads, and limited upside based on analysts’ price targets do not support sustainable outperformance," he warns.
  • "That being said, we are not suggesting investors refrain from holding any Consumer Staples positions in their portfolios. However, when looking out at the next 12 to 18 months, we are firmly Underweight Consumer Staples and do not believe the sector represents a compelling long-term investment strategy relative to other more attractive areas within the market."
  • Related ETFs: XLP, VDC, FSTA, RHS, FXG, PSL, PSCC, JHMS.

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