Consumer staples' strength could be here to stay.
Stocks, tracked in part by the Consumer Staples Select Sector SPDR Fund (XLP) have been outperforming the broader market as the coronavirus pandemic has worsened in recent weeks, with a 17% loss year to date versus the S&P 500's 24% decline.
The XLP surged nearly 8.5% on Friday as stocks rebounded in Wall Street's biggest one-day rally since 2008, erasing some of Thursday's debilitating losses. Thursday marked Wall Street's worst day since the 1987 "Black Monday" collapse.
Three things are helping the staples stocks hold up as consumers clear out supermarket shelves to prepare for the states of emergency being announced, said John Petrides, portfolio manager in the wealth management group at Tocqueville Asset Management.
"Typically, they're traditionally lower beta. They're less volatile. They have higher yields. So, in an environment where global bond yields have really collapsed, people are looking for income," Petrides said Friday on CNBC's "Trading Nation."
The idea that there's a "run on the grocery store" en masse isn't exactly hurting these stocks, Petrides added.
"Those three trends are really holding this group higher," he said. "And if we do have a market rebound from here on out, I would assume this group would probably be a relative underperformer. But that being said, if you haven't learned it before, you've learned it now: You better be diversified in your portfolio because you just don't know when volatility is going to strike."
While "you could see some short-term pressure, ... by and large, I would continue to expect the group to outperform," the wealth manager said.
One name in particular struck Petrides as a solid play for income.
"Within our enhanced income strategy, we like Unilever," parent company of Dove, Hellman's and Lipton, Petrides said. "They own a ton of great brands that are littered all over the grocery store. They have a dividend yield of near 3.5%, trading at a discount to the S&P 500 at about 15½ times. So, we think it is a big, solid, stable company."
Unilever's stock hit a 52-week low on Friday but rallied with the rest of the market in the final hours of trading and ended the day up more than 2%.
Still, with the stock down nearly 16% year to date, "we do think this is an attractive entry point here for Unilever," Petrides said.
Disclosure: Petrides and certain Tocqueville clients own shares of Unilever.
