The market has been signalling as pause if not correction with low volume and a switch from commodity and resources to defensive positions. As of the close on 5/16/2011 the following were the US industries or sectors leading and lagging:

Leaders:
Health Care
Utilities
Consumer Staples
Pharma
Semiconductors

Laggards:
Oil and Gas Exploration and Production
Oil and Gas Services
Clean Energy
Natural Resources
Metals and Mining

The leaders are telling us safety in the defensive sectors is the play.

The laggards are telling us it is clear from the lists that the assault on commodities to prop the dollar is working.

Sometimes boring is beautiful.  With some areas like steel, coal, and some emerging markets up over 100% or more in 2009 talking about a fund that invests in everyday products seems silly.  Or is it?  Global consumer staples did not go off like a rocket in 2009 but provided a solid 22.85%.  If we look inside the iShares Global Consumer Staples fund (ticker KXI) you will find companies like Proctor and Gamble, Coke, Wal Mart, Pepsi, Unilever, Tesco, Neslte, Kraft, Colgate etc…

Why consider global consumer staples?

• In the markets return to risk taking there was little money chasing up global consumer staples in 2009.  The meteoric rise in the markets will not last forever and money will revisit the staples and drive prices.
• Consumer staples are considered defensive equities.  Staples are more or less permanent need items and typically hold up better than the over all market and many other sectors.
• The iShares Global Consumer Staples fund has a correlation of .86 to the MSCI All World stock index (ticker ACWI) and a significantly lower level of volatility versus the MSCI All World Index.
• KXI has a total return of 15.07% over the last three years ending 12/31/09 versus ACWI’s negative total return of -2.94% in the same time period.  KXI has an average monthly return of .42% over the last three years and its monthly returns over the last three years have been above the average 66% of the time making it a very consistent fund.
• When the steam runs out of this bear market rally consumer staples should hold up better than most areas and if the markets keep going up consumer staples will participate.

The iShares Global Consumer Staples fund provides exposure to both foreign and domestic markets.  The fund is above it 50 and 200 day EMA.

Chart courtesy of StockCharts.com

Disclosure Statement: ETFGPS is a blog that Navigates The World of ETFs. Sustainable Investment Strategies LLC is a Registered Investment Adviser in the State of Maryland, and does not hold positions in the ETFs mentioned at the time of writing. Investors who are interested in money management services may visit the Sustainable Investment Strategies LLC web site