Investors are preparing for lots of ups and downs in the market in 2022. In this clip from "The Rank" on Motley Fool Live, recorded on Jan. 31, Fool.com contributors Jason Hall, Dan Caplinger, and Matthew Frankel, CFP®, discuss their pick for the safest market sector amid the volatility this year.


Matt Frankel: This is the consumer staples sector, and the best way I can describe this in a couple of words, it's things that people need.

Jason Hall: It's Procter & Gamble and like 11 other companies.

Frankel: Well, it also includes retailers that sell these type of products.

Hall: Yeah, right.

Frankel: Like Walmart and Costco are big players of the consumer staples sector. Grocery stores are in there. Personal products is a category, you mentioned Procter & Gamble. I'll let you guys start. Let's start with Dan on this one. Dan, why did you like the consumer staples sector so much for 2022?

Dan Caplinger: Well, again, with the theme 2022, kind of a consolidation year, kind of a crummy year for the stock market, in my view. Looking only at 2022, I see consumer staples traditionally defensive, able to hold up well in tough market environments, a traditional escape route for folks that have gotten freaked out by higher-volatility stocks, but they don't want to leave the stock market entirely. Folks looking for security in a tough environment, I think that this is something that people are going to gravitate to. I think that consumers still look strong at this point. Higher wages will give them the pricing power to be able to buy up for more expensive staples products that helps the premium companies like Procter & Gamble versus more of the private label companies that do generics and that kind of thing. Puts a premium on brands, puts a premium on pricing power, especially in an inflationary environment. I just think everything is pointing consumer staples' way and it reflects my modest expectations for 2022 as far as overall stock market performance is concerned.

Hall: Do you guys remember when the last time we had a full calendar year where the market closed lower than it opened?

Frankel: 2008.

Hall: I think you might be right.

Caplinger: I think there may have been a year where one of the indexes was down and one of them wasn't.

Frankel: Yeah, I think you're right. There was a year where the S&P was down by like 2 or 3 percent or something like that.

Hall: That's 2018 because we had a full 20% drop at the end of the year, right?

Frankel: Right, I do remember that.

Hall: From like October through Christmas Eve, we had a 20, 21% drop. Total returns fell 4.8% or 4.4% negative returns in 2018. That's the only one we've had since 2010, 2011. Even during the pandemic year 2020, it ended up being a great year for investors that held through or bought at some of those bottoms. I'm not sure that we're going to continue to see that. I think there is going to be, Dan was talking about, are we going to continue to see some revaluations in some of these highfliers? We've seen that in tech and we've seen it a lot in growth. Are we going to continue to see that multiple move back toward where it was in like 2019, 2018, 2017? I think there's a really good chance we could. That happens, think about Microsoft, this is a company that still trades for probably 12 or 13 times sales, it never traded this high of a multiple except for like in '99, '98, and early 2000 until the past couple of years. Extrapolate that out and what's the market going to do? I think if you're looking to have some sort of a predictable floor, how can you protect against losses and own some investments that can generate some meaningful return? I think it's really interesting. If you're really concerned about that volatility to the downside, but you want to be exposed to stocks, I think this is the sector to buy with part of your portfolio to give you some stability.

Caplinger: I'm just going to say though, into question the ProShopGuy was asking, these are one-year picks for me, and Matt, if I misunderstood the deal, this is a one-year pick, this is not a longtime pick.

Frankel: That's correct.

Caplinger: Don't get the wrong idea, I'm not saying change your whole long-term portfolio.

Hall: No way.

Caplinger: I'm just having fun with this and saying, "Hey, for the next year, I think we got some headwinds." Ask me five years, this all changes completely. I don't want anybody out there freaking out that I'm like saying, "I don't like tech as much as I like consumer staples." This is just a one-year horizon, so put that in that context.