The S&P 500 can be divided up into different sectors based on the companies and the products or services they provide. One of those sectors is known as the consumer staples sector. What kind of stocks make up consumer staples?
Starting in 2020, we’ve heard the word “essential” versus “nonessential” time and time again. The idea is some businesses have to continue and will continue at all times, no matter what happens in the economy.
Those businesses make up the consumer staple sector. These products and services will continue to be purchased even as the economy slows down. That doesn’t mean you should only buy consumer staple stock, but it does mean during a slowdown, the stocks in this sector will likely outpace the others.
How can you tell if a product is a consumer staple? Just ask yourself, “If the economy tanked, would I still buy this product?” If so, it’s likely part of the consumer staples stock.
Consumer staples are made up of companies like Proctor and Gamble or Coca-Cola. We’re still going to buy drinks no matter what. We’re always going to buy food and toilet paper. We all remember going to the grocery in early 2020 and realizing the toilet paper was all gone! That’s because it’s one of the staples of the economy.
This sector makes up about 6.7% of the S&P 500. Again, these are the kind of stocks you want to own during a market slowdown. As the economic cycle slows down and the economy contracts, the types of stocks you might want to look at would be companies like Proctor and Gamble, Costco, General Mills, Hershey Foods, Kellogg, Wal-Mart, and more. These kinds of stocks act as staples for the S&P 500.