"History does not repeat itself. But it does rhyme."
Armed with the above wisdom of Mark Twain, I've been reviewing S&P 500 sector performance throughout 2009 to get a deeper, more complete insight on stock market conditions. In part, I'm trying to compare the market's current reaction to its performance during the last big bear market, from 2000 to 2002. As a result, I've discovered one sector that seems better-protected than any other against the ravages of a gloomy economy.
So far, I've found one big difference between this bear market and the last: which industries are playing the roles of hero and villain. Last time, we were pulled down by technology; the likes of JDS Uniphase
In addition, back at the turn of the millennium, we had better places to hide our money away, even only on a relative basis. This time around, unprecedented withdrawals -- both from institutions like hedge funds and mutual funds and individual investors --left all sectors down by double-digit percentage points in 2008.
The best, relatively speaking
Last year, one sector fell a lot less than the rest of the market: consumer staples. It dropped less than 15% on a total-return basis, compared to a 37% drop for the S&P 500 on the whole.
Since the U.S. consumer's newfound frugality is a watershed event -- unemployment is high by historical standards (and still rising), home prices have rapidly deteriorated, and pension plans have been decimated -- consumer staples are a smart place for investment dollars. This is especially true now, as the summer, not known for being kind to stocks, brings so much uncertainty.
Four consumer-staple stocks I've reviewed this year -- and still like -- are Altria
Fortified by products that people buy again and again, consumer staples are better-positioned against dividend cuts (though they are certainly not invincible). That matters a lot: According to S&P, 44% of the 9.51% average annual return of the S&P 500 since January 1926 has come from dividends.
Ponder that the next time you're looking at an investment that pays none.
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