An Overlooked Defensive Sector?

Vinay Tolia |
Categories
Weekly Market Commentary

The defensive rotation may have missed a sector.

Staples are up 10% this year as investors reach for safety. Healthcare — equally non-cyclical, equally essential — is flat. Both trade at similar multiples. Individual names like Merck and UnitedHealth sit at 12-14x forward earnings.

XLP (Staples) 24x +10% YTD vs XLV (Healthcare) 25x flat YTD — forward P/E comparison and 1-year performance chart

As we discussed in Volatility Pulse, stagflation concerns are rising. When growth slows and costs stay elevated, essential spending holds up. Healthcare may be worth a closer look for clients already thinking about non-cyclical positioning — it hasn't caught the same defensive bid as staples.

Ways To Express This View

Snowball: 4 YR / XLV / 12MNC / 70% EKI / ~8% P.A.

Growth: 4 YR / XLV / ~125% participation uncapped / 70% EKI

*Indicative terms only. Final pricing subject to market conditions at time of trade.