As investors have rotated out of tech names to start 2026, consumer staples have been a primary beneficiary. Consumer staples is the third-best sector in the S & P 500 year to date, behind materials and energy . The sector is up more than 15.5% in 2026, while the broad market index is little changed in the period. Wolfe Research wrote in a Tuesday note that market-weighted valuations for consumer staples have surged to their highest levels since the 1990s. Bank of America found earlier this month that net inflows into the sector as a percentage of market cap were at an all-time high. The rally has been so rapid that the sector now has a relative strength index reading of 80, indicating it may be in overbought territory. “Most of what we’ve seen year-to-date has less to do with staples itself, and more to do with the broader market,” Deutsche Bank analyst Steve Powers said in an interview with CNBC. “As there has been a rethink of market positioning, most specifically toward the tech sector… it has opened up rotation into more overlooked, arguably less popular, and defensive sectors.” Walmart’s enormous footprint Amid the rally, staples’ largest company Walmart joined the exclusive $1 trillion market cap club, which is largely made up of tech giants. The company has benefited from being viewed as a retailer prepared to adjust for the artificial intelligence economy, Citi analyst Paul Lejuez said in an interview. “It’s the combination now of both their historical, brick-and-mortar econ business, but also what they’re doing in the world of tech,” he said. “A lot of what they’re building will only, I think, increase the distance between them and the competition.” Walmart’s sector peers’ shares have lagged behind until the recent rally. In 2025, Walmart gained more than 23%, while consumer staples overall were essentially flat. Walmart’s 20% jump in 2026 is much closer to the sector’s advance. WMT 1Y mountain WMT 1-year chart. Sector drivers in 2026 So why are other names in the sector now getting attention? Bank of America analyst Peter Galbo wrote in a recent note that dollar weakness could be aiding shares of companies with multinational presences, like Coca-Cola , Procter & Gamble and Philip Morris . Galbo added those with easier comparison periods for earnings — like Constellation Brands and Conagra Brands — are seeing some of the better performances, too. There are also signs that fundamentals for these stocks may start improving. Some analysts have named companies within the sector as likely to benefit the most from larger tax refunds tied to President Donald Trump’s “big beautiful bill.” “If you go back to 2025, a big part of the headwinds to demand was tied to the lower- and lower-middle-income household income cohorts,” Deutsche Bank’s Powers said. “To the extent that they bring some relief… that would be a help to a lot of sectors, but it could help consumer products’ demands as we go into the year.” Powers added that investors are hopeful that consumption and demand will rise as 2026 goes on, boosting these stocks. That’s something some companies are already projecting, with Procter & Gamble CFO Andre Schulten in the company’s recent earnings call telling investors to “expect stronger results in the second half” of its 2026 fiscal year. For staples’ outperformance to continue, there will need to be more signs of improving fundamentals and continuing investor interest in rotating out of momentum stocks, Powers said. He added that the rest of the earnings season will be critical to discovering more on the fundamentals angle. As for the rotational play, Interactive Brokers chief strategist Steve Sosnick forecasted that investors’ behavior to start 2026 won’t change throughout the year. “We’re going to see the trend of value stocks becoming more popular continuing,” he told CNBC, particularly amid tech’s relative underperformance even before 2026 started. “So it’s sort of like, ‘Let me return to the knitting here. Maybe boring is good in this environment.'”
