XLP vs. VOO: Consumer Staples Outperform S&P 500
- XLP gained as the S&P 500 had its worst day since 2020.
- Fears of an escalating trade war and a slowing economy continue to grip investors.
- Defensive sectors like consumer staples have outperformed the broader market.
As fears of an escalating trade war and a slowing economy continue to grip investors, defensive sectors like consumer staples have outperformed the broader market.
The Consumer Staples Select Sector SPDR Fund (XLP) has outpaced major S&P 500 ETFs like the Vanguard S&P 500 ETF (VOO), as investors seek stability in essential goods and services.
For a case in point, look no further than last Thursday. The S&P had its worst day since 2020, when Covid-19 fears gripped the world. XLP rose 0.6% while VOO dropped 4.8%.
The outperformance has been similar for all of 2025.
Unlike cyclical sectors, which thrive during economic booms, consumer staples, also known as consumer non-cyclicals and consumer non-discretionary, tend to hold up well in uncertain times. This makes ETFs like XLP an attractive option for investors looking for a more defensive positioning in 2025.
How XLP Works and How It Invests
The XLP ETF is designed to track the Consumer Staples Select Sector Index, which includes some of the largest and most stable consumer staples companies in the United States. These companies operate in industries such as food, beverages, household products and personal care—areas where demand remains relatively constant regardless of economic conditions.
Examples of consumer staples stocks include the following.
- Procter & Gamble Co. (PG): A leader in household and personal care products
- Coca-Cola Co. (KO): A dominant player in the global beverage industry
- PepsiCo Inc. (PEP): A diversified giant with a strong presence in both snacks and beverages
- Walmart Inc. (WMT): A retail behemoth that thrives on steady consumer demand for everyday goods
By holding a basket of these established companies, XLP provides investors with broad exposure to the consumer staples sector while minimizing the risks of investing in individual stocks.
XLP vs. VOO: Staples Beating S&P 500 in 2025
Source: Data as of April 3, 2025 from etf.com's ETF Comparison Tool
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Outlook for XLP, Consumer Staples ETFs in 2025
The outlook for consumer staples ETFs, including XLP, remains positive for the remainder of 2025, especially as investors grapple with trade uncertainty and economic slowdown concerns. If inflation remains persistent, consumer staples companies, which produce essential goods, may be able to pass higher costs onto consumers without significantly impacting demand.
Additionally, these companies often offer attractive dividends, making them appealing to income-focused investors.
However, a potential downside for XLP is its relative underperformance in bull markets. If economic conditions improve and investor risk appetite increases, funds may flow back into higher-growth sectors like technology and discretionary spending, leading to relative weakness in consumer staples. Nonetheless, for investors seeking a defensive approach with steady dividends, XLP continues to be a compelling option in today’s uncertain environment.
