Best Sector ETFs For May: Safety and Risk

Welcome to May. The fifth month of the year historically marks the beginning of the weakest six-month period for stocks. Hence the old adage “Sell in May and go away.” In the coming days, investors are likely to hear plenty about whether or not they should sell in May.

 

Unfortunately, those same investors probably will not hear too much about what sectors and the corresponding exchange traded funds usually perform well in May. We'll fix that right here, right now by examining the sector SPDR ETFs that have historically performed well in May since 1999, the first full trading year for the sector SPDR suite. Those ETFs debuted in mid-1998, making 1999 the first full trading year for the funds.

 

Underscoring the notion that investor opting to remain long equities at this time of year like to do so in conservative fashion, the Consumer Staples Select Sector SPDR (NYSE: XLP) is usually the best of the nine legacy sector SPDR ETFs this month. XLP, the largest consumer staples ETF by assets, posts an average May gain of over one percent, according to CXO Advisory data. 

 

Up 3.6 percent year-to-date, XLP has been one of the more solid options among sector ETFs. The ETF's top 10 holdings include familiar staples fare, such as Dow components Procter & Gamble Co. PG, Coca-Cola Co. KO and Wal-Mart Stores Inc. WMT.

 

Placing second among the nine SPDRs on a historical basis for May is the Energy Select Sector SPDR XLE. XLE, the largest energy ETF by assets, averages a May gain of just under one percent dating back to 1999, according to CXO data.

 

XLE is also the second-best of the nine SPDRs in March and April, but May usually represents the end to the energy sector's favorable period of seasonality. 

 

May is one of four months of the year in which XLE is either the best or second-best sector SPDR ETF on a historical basis. For XLP, May is one of three months in which the staples ETF ranks first or second among the sector SPDRs.

 

As for the two worst SPDRs on a historical basis, the pair also underscores investors' disdain for higher beta fare as summer looms. CXO Advisory data indicate the Materials Select Selector SPDR XLB and the Consumer Discretionary Select Sector SPDR XLY usually struggle in May.

 

XLB is up 8.5 percent year-to-date while XLY is higher by 1.3 percent.

Posted In: Long IdeasNewsSector ETFsIntraday UpdateMarketsTrading IdeasETFs

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on Bankrate.com. The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the Bankrate.com rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.