Procter & Gamble is riding on this year’s rally in the consumer staples sector, but there’s reason to believe the rally isn’t over yet. Procter & Gamble’s stock is up 10% so far this year, a sharp reversal from a 13% decline in 2025 when investors worried about weak consumer demand and rising tariffs. The consumer staples sector rose nearly 6% last week and is up more than 12% year-to-date, its best start since 1997. Consumer staples stocks are typically considered defensive stocks and are of interest to investors during times of economic and market uncertainty. While some of the sector’s recent strength reflects a broader rotation out of tech stocks, Bank of America argues that the move is also supported by improving fundamentals. This marks a marked change from recent history. Consumer staples remained largely unpopular through 2025 and has lagged the S&P 500 in both stock performance and profits over the past few years, according to a Feb. 5 note from Bank of America. The background has changed significantly as we move towards 2026. Concerns about the impact of artificial intelligence on traditional enterprise software and increased capital spending by giant companies to build their own AI products are driving investors away from high-growth technology stocks. In the past few weeks, the big four hyperscalers — Amazon, Microsoft, Meta and Alphabet — have collectively projected nearly $700 billion in capital spending this year, which will absorb most of their operating cash flow. Investors responded to these alarming predictions by selling. Last week, the combined market capitalization of those four stocks, plus Oracle and Nvidia, fell by more than $1 trillion, according to FactSet data. Instead, investors turned to traditional safe-haven assets like Procter & Gamble, which has a long track record of managing businesses well during market and economic uncertainty. P&G’s diverse portfolio of household brands, combined with disciplined cost management and pricing power, has historically helped the company protect profits even when consumers pull back. Rotation theory was the primary reason we initiated a position in P&G on November 18th and steadily added to our position on November 25th, December 2nd, and January 2nd as the stock price declined. Indeed, the outflow of money from tech stocks to more economically resilient names helped fuel P&G’s recovery. We downgraded P&G from 1 to 2 last week given the recent rally. This means waiting for a meaningful decline before adding to your position. PG 1Y Mountain PG 1 year performance. Bank of America said in a note that there was “fundamental demand improvement” driven by strength in emerging markets, a weaker U.S. dollar and weather-related benefits from the winter storm. The bank said that for multinational companies like Procter & Gamble, a weaker dollar boosts international sales and is “a tailwind for revenue and EPS flexibility.” Proctor has significant international operations, with approximately 50% of its sales coming from outside the United States. Demand remains high in China, the second largest market, as well as Western Europe and Latin America. On the other hand, lower oil prices will allow the company to reduce transportation and packaging costs, improving profit margins. These dynamics are already impacting the bottom line. When Procter reported its second quarter of fiscal 2026 last month, management noted that a weaker dollar provided an after-tax currency tailwind of approximately $200 million to Procter & Gamble’s fiscal 2026 earnings growth. BoA also highlighted PG’s “obvious inflection in U.S. fundamentals,” suggesting favorable price pricing going forward. New CEO Shailesh Jejrikar, who took over on January 1, said he would double down on investments in the brand to drive market growth while cutting costs wherever possible. The company expects further strong growth in the first half of 2026. We see P&G as a reliable stock that balances out the portfolio’s many AI-themed stocks and shows signs of improving growth. We maintain a stock rating of 2 and a $165 price target. (Jim Cramer’s Charitable Trust is Long PG. See here for a complete list of stocks.) As a subscriber to Jim Cramer’s CNBC Investment Club, you will receive trade alerts before Jim makes a trade. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. The above investment club information is subject to our Terms of Use and Privacy Policy, along with our disclaimer. No fiduciary duties or obligations exist or arise from your receipt of information provided in connection with the Investment Club. No specific results or benefits are guaranteed.
