Consumer Defensive Stocks Live Up to That Name During Tariff Selloff

Key Takeaways

• Of the 20 largest holdings in the US Consumer Defensive Index, only one has fallen further than the overall market since the tariff selloff began Thursday.
• Many consumer defensive industries have limited exposure to imports and exports, helping their stocks hold up well amid the tariffs.
• The overall sector is seen as modestly undervalued, with some stocks trading at significant discounts.

As the stock market plummets in response to President Donald Trump’s wave of tariffs, the consumer defensive sector is largely holding steady, living up to its reputation as a safe haven during turbulent times.

The Morningstar US Consumer Defensive Index fell roughly 4% Thursday and Friday, dropping less than any other sector. Meanwhile, energy, technology, financial services, and industrials all fell by double digits.

Of the 20 largest holdings of the US Consumer Defensive Index, 18 posted losses since Thursday’s open. However, none fell further than the overall market, which tumbled 10.6%. Of those stocks, Target TGT fell the most with a 9.5% drop, while Walmart WMT had the second-largest drop at 7.4%. Mondelez MDLZ, which rose 0.4%, and General Mills GIS, which rose 0.7%, were the lone stocks posting gains.

Morningstar equity strategist Kristoffer Inton cites two reasons for the buoyancy of these stocks. “Many of these industries do not rely on a significant amount of imports for supply or exports for sales,” he says. “For example, packaged foods companies source much of their inputs domestically or from Canada or Mexico, which were not part of yesterday’s tariffs. These companies also derive most of their sales from the US.”

Secondly, “these are traditionally defensive sectors, so a rotation into these when market fears ramp up is somewhat expected. After all, if a recession hits, folks will still eat food, drink beverages, and likely smoke,” Inton explains.

Before the past two days, the consumer defensive sector was seen as 4% undervalued. The consumer-packaged goods subsector was trading at an even steeper discount of 13%, while the alcoholic beverage subsector was trading at a 34% discount.

With many of the most undervalued consumer defensive names posting losses over the past two days, their discounts have only increased. Campbell’s CPB, Kraft Heinz KHC, Coty COTY, Estee Lauder EL, Brown-Forman BF.B, and Constellation Brands STZ each have a Morningstar Rating of 5 stars, meaning our analysts view them as significantly undervalued.