Cheap, Sweet Drugs

Kellogg Company (K), practically embodying the definition of a consumer staple housed in the XLP sector ETF, is a global food company known primarily for its iconic boxed cereal brands (the company also owns Cheez-It, Pringles and Eggo waffles to compliment its cereals). 

With the extra $600 in weekly unemployment benefits currently still set to expire at the end of July 2020 from the Coronavirus relief aid, one has to wonder if the stock market is accurate in its uniquely optimistic forecast at the moment of a powerful recovery in terms of jobs. Of course, the market may be intentionally ignoring jobs, anyway, in favor of rewarding the largest firms in the world for coming out of the virus and fallout even stronger in terms of operating leverage and, in some cases, gaining market share on smaller businesses more adversely impacted by the virus. 

Either way, it is highly likely that as this summer rolls on we will see unemployment remain too high for comfort, even if the numbers surprise a bit to the upside. Hence, lower price point food products, especially as meat prices have been moving higher, place Kellogg in the sweet spot, literally and figuratively. Despite the devastating blunders by the FDA Food Pyramid since the 1970s in terms of promoting high carbohydrate (sugar) diets and demonizing natural fats, science has been self-correcting of late with more awareness of sugar's poisonous nature. 

However, in times of crises, even if it does place people at a higher risk if we see a second wave of the pandemic in the autumn, consumers who are getting squeezed financially will, unfortunately, cast aside concerns about diabetes and other deleterious effects of boxed cereals and reach for some of K's famous brands like: All-Bran, Apple Jacks, Cocoa Krispies, Kellogg's Corn Flakes, Corn Pops, Cracklin' Oat Bran, Froot Loops, Kellogg's Frosted Flakes, Frosted Mini-Wheats, Kellogg's Raisin Bran, Rice Krispies and Special K. 

On the daily and monthly charts, respectively below, K is poised for a major upside move.