[Weekend Money] U.S. Consumer Staples Are Rising... "Driven by Market Rotation and Weakening Consumer Sentiment"

Analysts expect stocks in the consumer staples sector to grow, driven by the rotation phase in the U.S. stock market and weakening consumer sentiment.

Associated Press and Yonhap News

Hana Securities recently selected the S&P 500 Consumer Staples sector as its top pick to position for the ongoing rotation in the U.S. equity market.

According to Hana Securities, the overall U.S. market index is not showing major moves, but there are clear shifts among sectors. This is a different pattern from the past three years, when investment sentiment toward artificial intelligence (AI), fueled by ChatGPT, led to a powerful rally in AI-related stocks.

Looking at moving averages, which connect the arithmetic average of stock prices over a set period by sector, more than half of IT stocks are trading below their 50-day and 200-day moving averages and are underperforming the S&P 500. In contrast, most stocks in the energy, materials, consumer staples, and industrials sectors are trading above their 50-day and 200-day moving averages. This indicates that these sectors are in an uptrend, offsetting the weakness in AI-related names.

Among them, analysts see growth potential in the consumer staples sector due to weakening consumer sentiment. For U.S. consumers, the cost of living is a key concern, and as a defensive sector, consumer staples are delivering performance that is comparable to energy and industrials.

U.S. consumer sentiment has fallen sharply. While the U.S. economy is viewed as having somewhat stabilized with lower inflation and a relatively stable unemployment rate, consumer sentiment has dropped to one of the lowest levels in the past 10 years because of cumulative price increases since COVID-19. Last month, the University of Michigan Consumer Sentiment Index came in at 56.4, down more than 36 points from 93.3 in the same period in 2016.

Rising housing burdens are also a positive factor for the consumer staples sector. The Home Ownership Affordability Monitor (HOAM Index) provided by the Federal Reserve Bank of Atlanta has been climbing since 2021 and reached 42% in December last year, a level similar to that of January to October 2007 (40-41%). The index measures the ability of a median-income household to purchase a median-priced home, and when housing costs exceed 30% of income, it is considered an unaffordable level.

With the U.S. midterm elections approaching, the biggest political issue is also "affordability," as surging prices and rents have become a major agenda item for American voters.

Lee Cheolhyeon, a researcher at Hana Securities, said, "In a situation where rotation is occurring from growth stocks to value stocks, value stocks are positioned to deliver stronger performance, and in this environment, the outlook for consumer staples can be viewed as bright."