The rate trade: Staples

It's amazing how things come to mind when price is near an inflection point.  For instance, with this sharp short term rise in rates, the first thing coming to my mind is Consumer Staples REITs and Utilities.  Today i'm going to focus on the staples.

The market is very heavy right now.  Naturally, we'd expect the market to turn to staples in a market correction.  However, fundamentally or technically, the group doesn't look so compelling.

The staples seem grossly over-valued.  If somebody would like to pass along some historical valuation info, that would be awesome!  Here's what I've found on current valuations via Fidelity

The most notable stat here is the EPS has shrank nearly 10% year-over-year.

Looking at the chart, we see the momentum in the 0 rates trade has been crushed as XLP has now lagged the market since January.  A possible rounding top has formed here.

This area is worth watching as a further increase in rates really takes the makeup off the Staples sector.

Trade 'em well!