The Safest Sector Today for Income Investors

The major stock market barometers have gone nowhere in 2015. Through the first seven months, the Dow 30 is down 1%, while the S&P 500 is up 2%. That said, the road to nowhere has been paved with considerable volatility, as the chart below attests.

 Dow 30 & S&P 500 Year-to-Date Performance

dow-s&p-500-performance

Of course, these barometers contain many companies from many walks of life. Some have done better than 2%; many have done much worse. Oil is an example on the downside. A barrel of crude fetches 15% less today than it did in January. Many oil companies are down as much as, if not more than, 15% – including a few of the big boys, like Exxon Mobil (NYSE: XOM) and Chevron (NYSE: CVX).

There have been pockets of performance; there always is.

Some of the best-performing stocks have been some of the most boring. Consumer-product stocks have held up well in 2015. The PowerShares Dynamic Consumer Staples ETF (NYSEArca:  PSL) is up 23% year-to-date. The fund is composed of U.S.-based companies that produce consumable goods: Altria Group (NYSE: MO), Church & Dwight (NYSE: CHD), Dr Pepper Snapple Group (NYSE: DPS) and similar such companies.

The problem from an income investor’s perspective is that the PSL offers little yield – 1.1% – at its elevated price. The upside is that the stocks that comprise the PSL fund should continue to draw investor attention, because market uncertainty is unlikely to abate soon.

Much of the elevated uncertainty can be ascribed to our friends at the Federal Reserve. Since the beginning of the year, investors have anticipated a move on the Fed’s part to raise interest rates. They’ve been greeted mostly with a shoulder shrug.

Investors were again left wondering about the future after the latest Federal Open Market Committee meeting (where Fed governors discuss interest rates), which adjourned July 29. As usual, the Fed released a deflective statement composed of standard boilerplate: we have growth, but growth is moderate, so there is still risk.

The Safest Sector

When uncertainty is high, investors are less willing to venture out on the risk curve. Established, well-branded consumer companies are welcomed havens. The logic is easy to follow: Regardless of what the Fed does on interest rates, and regardless of how interest rates impact the overall economy, people won’t stop consuming the basics – food, clothing, etc.

The PSL might not offer an enticing yield, but a few of its holdings do: Altria yields 3.8%, and its shares are up 11% for the year. As I mentioned last Friday, Altria’s nickname is “Mr. 20 Percent.” There’s a good reason for the nickname, and it should hold for 2015.

McDonald’s is another well-branded consumer products company with considerable name recognition. Yes, Mickey D’s has suffered its share of slings and arrows this year, but its shares are still up 6%. What’s more, these shares yield 3.4%. McDonald’s is on the mend, and I wouldn’t be surprised to see it soon emerge as a market darling.

McDonald’s is an original High Yield Wealth recommendation. Altria is a High Yield Wealth and Personal Wealth Advisor recommendation. Both services offer a number of well-branded consumer-product investments that offer income and peace of mind. To learn more about our consumer-product opportunities, as well as other investment opportunities, click here. We’ve got some strong names to get you through these weak times.

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Published by Wyatt Investment Research at