In the wake of President Trump’s announcement of a 10% tariff on most goods imported to the United States, global markets have been thrown into disarray, with investors around the world scrambling to find stable ground amidst the chaos. This move has raised concerns of an escalating trade war and potential negative impacts on global economic growth. In these uncertain times, Australian investors have sought solace in the consumer staples sector, known for its resilience during market volatility.
On Thursday, shares of Australia’s consumer staple companies saw a notable uptick, with grocers Coles and Woolworths leading the charge. Investors, in a bid to shield their portfolios from the market turmoil, have turned to these companies as safer bets. The sector closed 1.3% higher, a significant contrast to the broader Australian market, which fell 0.9% to its lowest point since March 14. Coles shares rose 2.1% to $20.29 AUD, and Woolworths advanced 1.6% to $30.02 AUD, both reaching their highest levels since early March.
The decision by the US to impose tariffs, described by Australian Prime Minister Anthony Albanese as ‘not the act of a friend’, has not prompted Australia to retaliate with reciprocal tariffs. Instead, the focus has shifted to domestic markets and industries that are less likely to be directly affected by international trade disputes.
‘Consumer staples are generally an outperformer in nervous markets as investors gravitate towards businesses that have consistent demand due to needs from the consumer,’ explained Mark Gardner, CEO and Head of Equities Advisory at MPC Markets. Indeed, the consumer staples sector, which makes up 3.8% of the benchmark index, is driven by the constant demand for everyday essentials, making it a more predictable and stable investment during times of market unrest.
Woolworths and Coles, Australia’s top supermarket chains, are particularly attractive to investors right now. These companies dominate the supermarket industry and generate the majority of their earnings domestically, insulating them from some of the international market pressures. ‘Investors who have to or would like to invest in Australian equities, focusing on companies that generate 100% of the earnings onshore can be a relatively safer investment in this environment,’ said Philip Pepe, a senior equities analyst with Shaw and Partners.
In addition to Coles and Woolworths, other companies that boast high foot traffic, high recurring revenue, and offer alternatives to imported goods are also well-positioned to withstand the tariff storm. This includes Metcash, which saw its shares gain nearly 1%, and pub operator Endeavour, which rose 0.5%.
As the market continues to react to global economic shifts, it’s crucial for investors to stay informed and adjust strategies accordingly. Consumer staples have certainly proven their worth during times of uncertainty, but what about other sectors?
What are your thoughts on investing in consumer staples during volatile times? Have you considered diversifying into other industries? Feel free to share your insights in the comments below.
Also read: High stakes for Australian beef as US tariffs loom
