Key takeout
Of the 20 largest holdings of the US Consumer Defense Index, only one person has seen a further decline in the market overall since tariff sales began Thursday. Many consumer defense industries have limited exposure to imports and exports, helping stocks work well amid tariffs. The overall sector is considered modestly undervalued, with some stocks trading at a massive discount.
With stock markets plunging in response to President Donald Trump’s tariff wave, consumer defense sectors are largely stable and have lived up to its reputation as a safe haven in turbulent times.
Morningstar U.S. Consumer Defense Index fell by around 4% on Thursday and Friday, down more than any other sector. Meanwhile, energy, technology, financial services and industry all fell by double digits.
Of the 20 largest holdings of the US Consumer Defense Index, 18 have recorded losses since opening Thursday. However, none of the entire market, which fell 10.6%, had fallen any further. Of these stocks, Target TGT was the most down with a 9.5% drop, while Walmart WMT showed the second biggest drop at 7.4%. Mondelez Mdlz, which rose 0.4%, and General Mills GIS, which rose 0.7%, were the sole stocks.
Morningstar equity strategist Kristoffer Inton cites two reasons for the buoyancy of these stocks. “Many of these industries do not rely on substantial imports for exports for supply or sale,” he says. “For example, packaged food companies source many of their inputs from Canada or Mexico that were not part of yesterday’s tariffs, from the country or Canada or Mexico. These companies also derive most of their sales from the US.”
Second, “These are traditionally defensive sectors, so when we fear that the market will rise, we expect a somewhat more turn towards them.
The consumer defense sector was underrated by 4% the past two days ago. The consumer-equipped product subsector was trading at an even more sudden discount of 13%, while the alcoholic beverage subsector was trading at a 34% discount.
Many of the most underrated consumer defense names posting losses over the past two days, but their discounts have only increased. Campbell’s CPB, Kraft Heinz KHC, Coty Coty, Estee Lauder EL, Brown-Forman BF.B, and Constellation Brands STZ each have a 5-star Morningstar rating.
