Key Points:
XLP’s Outperformance: A Rotation to Safety Rather Than Fundamental Strength
The recent outperformance of Staples (XLP) versus the broader market since late January has been remarkable, with a +10 percentage point gain in just two months. This surge coincides with one of the fastest market corrections in history, as the S&P 500’s decline since its February 19 high ranks among the sharpest 10% pullbacks on record.
However, it is crucial to recognize that this performance has not been driven by fundamental improvements among Staples. Neither volume growth nor price/mix dynamics are expected to see a meaningful improvement in 2025. Instead, the rally has been fueled by a rotation towards safety, driven by broader market concerns and a “flight to quality” environment.
