Staples vs. S&P500: The Synthetic Hedge Is Undervalued

Callum_Thomas
12-10

Here's the relative performance line for consumer staples -- you can see how the extremes in relative value were created.

Staples lagged behind into the dot com peak, and gained ground during the 08 crash.

More recently they have basically lagged for the past decade during the rise of big tech.

Staples are described as defensive for this reason (healthcare, utilities, and sometimes REITs and gold miners, among others also fall into this category). $S&P 500(.SPX)$

You can kind of think of staples' relative performance line as a synthetic asset (i.e. long staples vs short S&P500). That synthetic asset did very well in 2022 (and did ok [briefly!] in March 2020, April 2025).

This synthetic asset is now very cheap, and will probably serve as a decent hedge in the next downturn/crash.

(so it's basically a cheap alternative hedge)

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