3 Valuable Consumer Staples Picks For Investors Right Now

The consumer staples sector has been performing well of late buoyed by rising consumer confidence and improving economy. Strong recovery in the housing market and an improving labor market played a crucial role in boosting buyers’ confidence. Encouraging manufacturing index readings issued by the Institute of Supply Management (ISM) also hints at a pickup in GDP, indicating that economy is in good shape currently.

Drivers Indicating Improvement in Economy

Consumer confidence improved moderately in June, with the Consumer Confidence Index up from May’s reading of 117.6 to 118.9 in June. Steady job additions and persistently low unemployment have helped the household wealth to increase. This in turn, boosted consumer spending.

The recent hike of its benchmark interest rate by a quarter point by Federal Reserve reiterates the fact that the economy is doing well. Further, the Fed indicated that it anticipates the next hike in December, along with three more in the coming year, which signals rising consumer confidence as well as the U.S. economy’s growth.

The fresh data from ISM’s manufacturing index also hit a record level in June which increased from 54.9 to 57.8, its highest level since Aug 2014. It is also significantly higher than the estimated level of 55.1. This reflects improvement across most sectors. The report also reveals that a strong uptick in demand has taken place, which is why it would be a smart move to pick stocks from the consumer staple sector, which is well positioned to benefit from this stellar reading on confidence level.

Sector’s Correlation with the Economy

The Consumer Staple sector, which is at the top 38% of the Zacks Sector Rank (6 out of 16), also holds some promise, given the favorable economic indicators. We note that since past six months, the sector has registered an increase of 8.71%, higher than the S&P 500 that is up 7.44%.

The rebound in oil prices from all-time lows, improving employment scenario and a gradual improvement in the housing market signal that the economy is on a recovery mode.

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