BMO Canadian ETF Dashboard

— as of August 31, 2019 —

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Buy Consumer Staples

M. Sean McGoldrick

Buy Consumer Staples

Summary of Trade Ideas

BMO Global Consumer Staples Hedged to CAD Index ETF (Ticker: STPL)

Macro View:

Let’s talk about U.S. interest rates, commodities and the U.S. consumer. Rate hikes in the U.S. have been largely priced into the market (1.5 hikes priced in for the remainder of 2018). CIBC believes the Federal Reserve will hike 2 more times this year and at a gradual pace thereafter.

Meanwhile, trade tensions and higher U.S. rates are a headwind for commodity prices (slower growth), which have come off their highs since late May. For oil in particular, CIBC believes that we can see a smooth decline in WTI crude oil towards $60 per barrel over time as more supply comes on line.  

Finally, what about the U.S. consumer? They’re not doing too badly. Wages are slowly rising and unemployment is at record lows. And now they’re starting to see the tax cuts show up in their paycheques. The result? Retail sales are up; in fact, in May they were up the most in 6 months. Falling gasoline prices suggest retail demand can continue into the second half of 2018.

Putting this all together, you can make a good argument to own STPL.


ETF Idea:
Own BMO Global Consumer Staples Hedged to CAD Index ETF (STPL)

  • Consumer Staples have been the big sector under-performer year-to-date, with STPL down 6.5% on the year.
  • The sector has seen short-selling interest thanks to worries about tobacco regulation and Amazon.com (AMZN) moving in on groceries.
  • The up-trend in commodity prices (lower margins) and higher U.S. rates have also hurt.
  • However, previously unloved sectors like retail have begun to rebound. Will STPL be the next XRT? (SPDR S&P Retail ETF [XRT] is up 17% from its April lows.)
  • Commodity prices and U.S. rates have also cooled from the mid-May peaks creating less of a headwind for staples. Meanwhile, consumer spending remains strong and given XRT’s performance, there’s less fear of the AMZN effect.


Time for a catch-up?
Year-to date, consumer staples have under-performed both retail stocks and the broader market. 

Aug-2018-Sean-Chart-A.PNG#asset:1435


M. Sean McGoldrick

Buy Consumer Staples

Summary of Trade Ideas

BMO Global Consumer Staples Hedged to CAD Index ETF (Ticker: STPL)

Macro View:

Let’s talk about U.S. interest rates, commodities and the U.S. consumer. Rate hikes in the U.S. have been largely priced into the market (1.5 hikes priced in for the remainder of 2018). CIBC believes the Federal Reserve will hike 2 more times this year and at a gradual pace thereafter.

Meanwhile, trade tensions and higher U.S. rates are a headwind for commodity prices (slower growth), which have come off their highs since late May. For oil in particular, CIBC believes that we can see a smooth decline in WTI crude oil towards $60 per barrel over time as more supply comes on line.  

Finally, what about the U.S. consumer? They’re not doing too badly. Wages are slowly rising and unemployment is at record lows. And now they’re starting to see the tax cuts show up in their paycheques. The result? Retail sales are up; in fact, in May they were up the most in 6 months. Falling gasoline prices suggest retail demand can continue into the second half of 2018.

Putting this all together, you can make a good argument to own STPL.


ETF Idea:
Own BMO Global Consumer Staples Hedged to CAD Index ETF (STPL)

  • Consumer Staples have been the big sector under-performer year-to-date, with STPL down 6.5% on the year.
  • The sector has seen short-selling interest thanks to worries about tobacco regulation and Amazon.com (AMZN) moving in on groceries.
  • The up-trend in commodity prices (lower margins) and higher U.S. rates have also hurt.
  • However, previously unloved sectors like retail have begun to rebound. Will STPL be the next XRT? (SPDR S&P Retail ETF [XRT] is up 17% from its April lows.)
  • Commodity prices and U.S. rates have also cooled from the mid-May peaks creating less of a headwind for staples. Meanwhile, consumer spending remains strong and given XRT’s performance, there’s less fear of the AMZN effect.


Time for a catch-up?
Year-to date, consumer staples have under-performed both retail stocks and the broader market. 

Aug-2018-Sean-Chart-A.PNG#asset:1435