Walmart and Costco Are 1/3 of XLP’s Defensive Portfolio, Creating A Huge Risk For A Defensive Holding

Core Insights - The Consumer Staples Select Sector SPDR Fund (XLP) focuses on essential goods, holding 99.3% of its portfolio in companies that produce groceries, household goods, and beverages, with net assets of $16.2 billion and an expense ratio of 8 basis points [2][3] Group 1: Fund Characteristics - XLP is designed for stability during economic uncertainty, featuring a 2.67% dividend yield and an 8% portfolio turnover, indicating a buy-and-hold strategy aimed at income generation rather than capital appreciation [3] - The fund allocates 28.73% of its assets to three major companies: Walmart, Costco, and Procter & Gamble, which dominate their categories and provide predictable cash flows [3] Group 2: Market Performance - Retail sales reached $735 billion in December 2025, growing 3.3% year-over-year, despite a pessimistic consumer sentiment reading of 52.9, indicating continued consumer spending on staples [4][6] - XLP has returned 15.2% year-to-date through February 13, 2026, outperforming its 12.9% one-year return, with Walmart achieving 20.2% year-to-date returns, Costco at 18.3%, and PepsiCo at 15.6%, while Procter & Gamble lagged behind [5][6]