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Consumer staples ETFs, usually the quiet corner of the market, are suddenly in the spotlight. The $48.7 billion acquisition of Kenvue Inc. (NYSE:KVUE) by Kimberly-Clark Corp (NASDAQ:KMB) has stirred renewed interest in the sector, setting up a potential reshuffling of weightings across several big-name ETFs.
• KVUE is showing downward pressure. See if it is worth your attention here.
The Consumer Staples Select Sector SPDR Fund (NYSE:XLP), with close to $15.3 billion in assets, is the largest ETF representative of U.S. staples heavyweights such as Procter & Gamble Co (NYSE:PG), Coca-Cola Co (NYSE:KO), and PepsiCo Inc (NASDAQ:PEP).
While Kenvue, which makes a wide range of consumer health products such as Tylenol, and Kimberly-Clark account for less than 5% combined in the ETF, the deal's size may result in the ETF rebalancing once the merger closes and Kenvue delists. XLP is down about 3.5% year-to-date, versus the S&P 500's 15.5% gain, but offers a yield of 2.8%. That steady income play may start to look more attractive in choppy markets.
Also Read: Options Corner: Kimberly-Clark’s Implosion Offers An Unusual Informational Arbitrage Opportunity
Similarly, the Vanguard Consumer Staples ETF (NYSE:VDC), at $8.5 billion in assets, counts Kenvue and Kimberly-Clark among its top 15 holdings. Flat so far in 2025, this fund reflects muted sentiment in the defensive space, but long-term fundamentals might strengthen due to consolidation-driven efficiencies such as the estimated $1.9 billion in cost synergies expected from the Kenvue deal.
Meanwhile, the iShares U.S. Consumer Goods ETF (NYSE:IYK), with $1.3 billion in AUM, offers broader exposure beyond pure staples, including discretionary plays.
Investors are watching this deal closely, as it’s not every day a consumer name north of $40 billion in equity value disappears from the index universe. That’s going to ripple through passive funds.
Beyond index mechanics, the deal also revives one of this year’s forgotten themes: the defensive trade. Valuations are stretched thin in the tech-rich ETFs, and staples funds like XLP, VDC and IYK could see some quiet rotation toward steady cash flow and brand durability.
After all, while AI stocks promise the future, it’s the staples trade — built on diapers, tissues, and painkillers — that keeps paying today.
Photo: Piotr Swat via Shutterstock
