Defensive Sectors Buoy Market
as Trump Targets Europe Dear Reader,
Last week, President Trump called for a “straight 50% tariff” on goods coming from the European Union starting on June 1.
Markets got jittery on the news, driving major U.S. indexes to close at least 2% lower for the week.
This morning, though, we’re seeing investors pile back into stocks after the president agreed to delay this latest round of levies on European goods until July 1. Markets are up between 1% and 2% as I write.
This feels very similar to what happened with China recently. The emerging pattern appears to be: - Trump makes headlines with a new tariff threat.
- Markets sour on the news.
- Some deal or delay is announced.
- Investors get bullish again.
Rinse and repeat — at least so far!
With that as a backdrop, let’s see how sector performance shook out last week as investors were nervous about the proposed tariffs on the European Union:  Key Insights: - The S&P 500 (SPY) closed the week with a -2.5% loss.
- All 11 major sectors traded lower.
- Five sectors underperformed the S&P 500.
- Consumer staples (XLP) was the best-performing sector, with only a small 0.6% loss.
| The technology (XLK) and consumer discretionary (XLY) sectors, two top performers during up markets, lagged the S&P 500 as investors became more cautious.
Meanwhile, defensive sectors buoyed the market’s losses a bit, with utilities (XLU) and consumer staples (XLP) posting lesser losses.
That last point is where we’ll focus in this edition of What My System Says Today… Weathering the Storm: Consumer Staples Investors flock to the consumer staples sector when they’re feeling nervous. But what are they getting when they do that?
A quick breadth analysis using my Green Zone Power Rating system can help us answer that question.
I ran the 44 stocks currently in the Consumer Staples Select Sector SPDR Fund (XLP) to see where they land on my 100-point scale: - Bullish (stocks rated 60 to 100).
- Neutral (stocks rated 40 to 60).
- Bearish (stocks rated 0 to 40).
Here’s how my system is rating the consumer staples sector currently:  With just over one-quarter of stocks in the fund rated “bullish,” investors buying the whole sector are getting a lot of average- to poorly-rated stocks.
No one’s likely to lose their shirt investing in the sector, but gains are likely to be limited unless you identify only the top-rated stocks in the group.
Now, let’s see how the consumer staples sector shakes out on individual factors in my Green Zone Power Rating system. | Those who move today could 10X Their Money. 
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But Missing Something By broadening our scope to include six core factors, we can aim to get a much better feel for the makeup of a given sector. For example, we’ve seen in previous weeks how the tech sector is full of stocks that rate well on growth but poorly on value. That means that investors have bid up the price of those stocks as they hope their above-average growth in revenue and earnings will be worth it.
Here’s how the consumer staples sector (XLP) currently looks based on five of the six factors of Green Zone Power Ratings (leaving size out since these are all large companies that are included in the S&P 500 index):  With 75% of XLP’s stocks rating “bullish” on Quality, and another 63% “bullish” on volatility, we can see that this a batch of well-established companies that boast strong balance sheets and sturdy businesses, and they are rewarded with a steady stock that isn’t as prone to massive price swings.
But don’t expect a ton of growth when investing here. Only 1 in 5 consumer staple stocks rates “bullish” on growth.
All told, there are certainly staple stocks that can outperform, and you can use a system like Green Zone Power Ratings to find them.
Have a great week!
To good profits, 
Adam O'Dell
Editor, What My System Says Today
P.S. This week, I will send out my latest monthly recommendation to my Green Zone Fortunes subscribers. Click here to make sure you’re one of the first to have a chance to establish this new position in our model portfolio! | What My System Has Revealed Lately: | | 
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