Looking for a clean break from the market doldrums? Maybe it's time to look at household product stocks - or maybe not.

Last year, when the tech sector was falling apart and the economy was slowing, the household product sector outperformed others. This is because it is recognized as an industry group that normally sees very little volatility, a defensive outlet in light of its non-cyclical status.

Will we see the same situation this year? Given the circumstances, there's always a chance, but it's not definite.

So far, the household product sector hasn't attracted much investor interest. Why? The outlook for both the economy and technology sector has improved due to aggressive interest rate cuts by the U.S. Federal Reserve since the beginning of 2001. That's not all. The household product sector suffers from these inhibiting forces:

A lack of pricing power
Questionable valuations
A strong U.S. dollar (a positive force that reduces market uncertainty and economic concerns)
Some analysts believe, though, that we could see an upturn in household product stocks. With the situation surrounding the U.S. economy and tech sector far from over, a backdrop of market uncertainty and economic concerns still exists. And after months of extreme volatility, investors have become slightly less risk-tolerant. Household product stocks may therefore garner more interest in the coming months due to these reasons:

Skepticism in the market about the economy's ability to rebound strongly in the second half of 2001
The need for portfolio diversification in the wake of the tech meltdown
Concerted efforts by household product companies to bolster profitability through R&D initiatives, product consolidation and cost reduction
What's the bottom line? Despite the positive news surrounding household product companies, the market's see-saw view of economic and earnings prospects will most likely allow the group to only perform in line with the broader market.

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John Klotz is a Certified Financial Planner with LMS Prolink. You can email John or phone (416)-595-7484 ext. 305