Consumer staples are behaving (in a good way) like their technology counterparts. It may be the latter that’s helping the former. There are currently renewed fears about AI bubbles and hefty spending by hyperscalers. So some investors are trimming tech exposure and heading to more docile pastures, including staples.
As a result, October 2026 is on pace to be the best monthly showing for the S&P 500 Consumer Staples Index since October 1998. That trend is benefiting a slew of ETFs tracking this defensive sector. That includes the Invesco Dorsey Wright Consumer Staples Momentum ETF (PSL). The fund turned 20 years old earlier this month. And it’s getting in on this sector’s good times. That’s evidenced by a rally of almost 6% over the past month.
PSL is delivering the goods without massive weights to the biggest consumer staples companies. That’s potentially appealing to investors seeking defensive exposure. That’s because cap-weighted measures of the sector aren’t cheap these days.
“Consumer-staples stocks normally trade at lower, more defensive multiples because of steady growth and reliable dividends. But that doesn’t seem to be the case any longer,” reported Isabel Wang for MarketWatch. “The S&P 500’s consumer-staples sector traded at a forward price-to-earnings ratio (P/E) of 23.8 as of Tuesday morning, compared with 19.8 of the information-technology sector.”
Perusing PSL
PSL is very much an example of a sector ETF in which methodology matters. The fund tracks the Dorsey Wright Consumer Staples Technical Leaders Index. Put simply, that’s not a cap-weighted gauge. That means PSL isn’t a cap-weighted fund. And that’s potentially attractive at a time when the consumer staples sector is richly valued.
“The Index is designed to identify companies that have powerful relative strength or ‘momentum’ characteristics, and is composed of at least 30 securities from the Nasdaq US Benchmark Index,” according to Invesco. “Relative strength is the measurement of a security’s performance in a given universe over time as compared to the performance of all other securities in that universe.”
To its credit, PSL is actually home to some of the consumer staples sector’s names that some experts view as undervalued, including Conagra Brands (CAG), Darling Ingredients (DAR) and General Mills (GIS), among others.
Appealing Methodology?
Add to that, PSL’s momentum-based methodology may be appealing to investors at a time when some market observers believe there’s more gas in the consumer staples tank. They argue the sector is a better near-term bet than rate-sensitive utilities.
Originally posted on ETF Trends
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Invesco Distributors, Inc. is an independent company unaffiliated with VettaFi LLC (“VettaFi”). These articles do not form any kind of legal partnership, agency affiliation, or similar relationship between VettaFi and Invesco Distributors, Inc., nor is such a relationship created or implied by the articles herein. VettaFi LLC is the author and owner of these articles.
Invesco Distributors, Inc. does not provide legal or tax advice. This information is provided for general educational purposes only and is not to be considered legal or tax advice. Investors should consult with their legal or tax advisors for personalized assistance, including information regarding any specific state law requirements.
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