He adds that rising interest rates could be affecting the sector this year. Furthermore, dividend plays aren't as popular now that most U.S. Treasury notes are yielding more than the S&P 500 dividend yield.
As such, consumer staples—along with other dividend-heavy sectors such as utilities and telecommunications—are under pressure as investors “de-bond” their equity portfolio.
The one consumer staples ETF that is doing better relative to the others is Janus Henderson’s The Organics ETF (ORG), although it also has stumbled year-to-date with a loss of 3 percent. Last year it was up 28.75 percent. There is no three-year performance because it debuted in 2016.
ORG is a global fund with the top three countries being the U.S. (27 percent), Denmark (21 percent) and Australia (15 percent).
It holds 24 stocks, and its three top holdings include Danish bioscience company Chr. Hansen Holding A/S (22.92 percent), organic baby-food distributor Bellamy’s Australia Ltd. (6.54 percent) and Australian snack-food company Freedom Foods Group Limited (5.85 percent). Not surprising, its style is more small-cap. It also has a small AUM at around $13 million.
Manning believes the changes in consumer choices reflect where we are in the economic cycle, too.
“The natural/organic stuff is more expensive,” he says. “People are feeling flush. We have full employment and a tax cut. It’s easy to go to Whole Foods and not Aldi’s.”
But Manning doesn’t think the consumer staples sector is going through a secular change, noting that when safety plays are needed again consumer staples may be back in fashion. And he wouldn’t consider ORG a consumer staples ETF despite its sector classification.
“(Buying organic foods is) making a choice that cane sugar is in your soda rather than corn syrup,” he says. “That’s a cyclical choice. From my philosophical understanding of a staple, it’s something you’re going buy no matter what. I don’t know if that concept is the same based on the marketing of organics.”