Stock Market Defense: Soup, Soap & Cereal

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In the stock market, the Consumer Staples sector is a defensive play. Back in the bear market of 2022, I wrote about "Soup, Soap and Cereal". Since early in my career, I have referred to these economic elastic products and pillars of the stock market's Consumer Staples sector as a proven defensive stock market investing strategy. After a Deja vu moment this week, I thought about revisiting this investment approach again. Click here to see my Soup, Soap & Cereal article from May 18, 2022.

Based on the notion that no matter how weak the stock market or economy may get, people will continue to eat, buy soap and consume goods that are always in demand. These stocks typically pay high dividends and are proven safe havens for investors in volatile markets and recessionary times. While we are not in weak economy now, as GDP data indicated this morning, the stock market has rapidly rolled over in recent days suggesting a correction is under way. As a stock market "growth scare" is sending large cap, highly valued, mostly tech stocks down - the consumer staples "defensive" stocks are climbing higher. For a quick snapshot example of that, see the graph below. Notice the stark outperformance of the Consumer Staples sector over one day (this Tuesday) and the last month compared to the Information Technology sector.

Further, and for a more specific view, see the chart below which displays the soup, soap, and cereal stocks (Campbells, Proctor & Gamble and General Mills) vs. the biggest tech growth stocks over just 5 trading days between February 19 and the 25th. This is indicative of the sudden, sharp decline in growth stocks and the market's rotation to more defensive stocks.

Ultimately, offense is necessary to win a game. A strong offense is still crucial to consistently put points on the board and maintain a winning edge. As we have seen lately, though, a good defensive plan can result in a win. Perhaps coach Bill Belichick said it best, "Defense wins championships, but you need to score points too."

John J. Gardner, CFP®, CPM®
Blackhawk Wealth Advisors
3860 Blackhawk Rd, Ste. 160
Danville, Ca. 94506
888.985.PLAN (7526)
Schedule meeting here

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