Consumer Staples Are Massively Outperforming the Market—Here’s Why

The U.S. stock market has taken a turn lower this week, with the benchmark S&P 500 ETF (NYSEARCA: SPY) falling over 2% on the week coming into Friday, Feb. 6's session. Software and technology have led the market lower, along with the recent crypto and Bitcoin crash, sparking greater fears. However, while most of the U.S. equity market has turned lower in recent days and weeks, one segment has flourished. That sector is Consumer Staples. 

The Consumer Staples Select Sector SPDR Fund (NYSEARCA: XLP) surged almost 6% last week, and is up an impressive 11.89% year to date (YTD). The sector’s defensive nature is proving to be a significant asset right now. From a technical perspective, the sector just broke out of a major multi-year consolidation. With fundamentals and technicals aligning, the sector could be poised for further upside, especially if the broader market continues to face pressure. 

Consumer Staples Often Shine When the Broader Market Doesn’t

When markets turn volatile, and valuation and recession fears creep in, investors often gravitate toward areas of the market built for durability. Consumer staples tend to fit that role well. The sector comprises businesses that supply everyday necessities such as groceries, beverages, cleaning products, and personal care items. Regardless of economic conditions, households continue to spend on these essentials, which helps keep demand, revenue, and cash flow relatively consistent even during downturns.

That steady demand is what gives consumer staples their defensive reputation. When risk appetite fades, like we’re seeing with Bitcoin right now, and capital preservation becomes the priority, these stocks typically attract renewed interest. Many companies in the space also pay reliable dividends, providing income at a time when price volatility elsewhere can be unsettling. Past market cycles reinforce this dynamic. During periods of severe stress, including the 2008 financial crisis, consumer staples generally proved far more resilient than cyclical sectors such as technology and financials. 

2 Vehicles to Gain Exposure to Consumer Staples

Why XLP Is a Top Consumer Staples Sector ETF

For broad-based, sector-wide exposure, the ETF is your best bet. The XLP ETF will provide investors with diversified exposure to the staples sector at a low 0.08% net expense ratio. It also offers an attractive income component, with a 2.45% dividend yield. The ETF tracks the consumer staples index and holds over 40 of the largest names in the sector, including Walmart (NASDAQ: WMT), Coca-Cola (NYSE: KO), Costco (NASDAQ: COST), and Philip Morris International (NYSE: PM). 

From a technical perspective, momentum is firmly on the ETF’s side. It’s up close to 12% on the year, vastly outperforming the broader market. From a technical perspective, it’s got one of the most bullish charts across the market. Before this week, the sector ETF had been stuck in a consolidation since 2024. But that all changed last week when the ETF broke above the $84 resistance level, surging more than 5% higher. 

Coca-Cola: The ETF’s 6th Largest Holding

Beverage and consumer staples giant, Coca-Cola, has been a standout performer in the sector YTD. Shares of the 6th-largest holding in the ETF have surged 12.3% YTD and nearly 7% last week. Similar to the sector ETF, KO has major momentum behind its recent move. The stock broke above $75 this week, thereby breaking out of a multi-year consolidation and confirming the start of a new uptrend. 

Analysts share in the overall sentiment, with a consensus Buy rating based on 16 analyst ratings. And so do institutions. Over the past 12 months, $27 billion in institutional inflows have been recorded, compared with $19.1 billion in outflows. With price action, analysts, and institutions all bullish on the stock, it appears to be a solid individual choice if momentum in the sector continues.