•Consumer staples have been rising in profits against the battered S&P 500.
•Bitcoin hinted at decoupling from stocks, but it is too early to draw conclusions.
•Staple companies are outshining discretionary stocks as they demonstrate pricing power and can pass on price increases to customers without penalty.
Consumer Staples Outshine Discretionary Stocks
In times of crises such as the 2020 covid-19 pandemic, consumer staple companies tend to do better than more ‘exciting’ but risky tech sector. These companies provide essential products that people need regardless of their financial situation, resulting in them having pricing power and being able to pass on price increases. This has been demonstrated by the S&P 500 Consumer Staples continuing to grow while expectations for S&P 500 stock market index earnings have tanked.
Examples of Consumer Staples
Steve Sosnick of Interactive Brokers illustrated this principle using Chipotle Mexican Grill (CMG) as an example, with the company setting a new all-time high after beating estimates. The CFO stated that lower-income customers are returning to the restaurants even as prices have risen by about 10%. Other examples include Coca-Cola, Pepsi, McDonald’s, and Procter & Gamble who have also beaten analyst consensus estimates due to their ability to pass along price increases during their respective earnings calls.
Will Bitcoin Follow Suit?
As seen in the chart above, sellers appear to be betting that consumer discretionary stocks will fare better when compared against a strong economy; however it is too early yet if this trend will be applicable to Bitcoin as well. Bitcoin hinted at decoupling from stocks over recent weeks; however further evidence is needed before any definite conclusions can be drawn between both markets.
Overall, consumer staple companies are doing better than expected due to their pricing power and ability to pass on price increases which has resulted in higher profits when compared against the battered S&P 500 stock market index earnings expectations. It is still unclear what implications these trends will have for Bitcoin and cryptocurrency sector; however there are hints that it may decouple from stocks over recent weeks.
• Consumer staples rise in profits against the battered S&P 500 • Expectations of risk-on-equity returns are low • Bitcoin hinted at decoupling from stocks, but it is too early to draw conclusions • Staple companies outpace discretion stocks • Examples include CMG, Coca-Cola, Pepsi, McDonald’s, and Procter & Gamble