Market Overview

Hopefully No June Gloom For These Sector ETFs

Hopefully No June Gloom For These Sector ETFs

June is here and if historical trends hold true to form, this will not be a good month for stocks. Over the past 20 years, the S&P 500 averaged a loss 0.3 percent in June, putting the sixth month of the year in a tie with September for second-worst average monthly showing.

Additionally, the S&P 500's June win rate of 55 percent over the those 20 years ties June with three other months for the second-lowest win rate over that span. Only July at 45 percent has been worse.

As is the case with arrival of each new month, there are some sector exchange traded funds that, according to historical data, should outperform others this month. However, when it comes to sector ETFs in June, investors would do well to not expected jaw-dropping upside.

It's often said that owning lower volatility sectors, such as consumer staples, is a good way of maintaining long equity exposure during what can be a trying May through October time frame. On that note, conservative investors should take heart because dating back to 1999, the first full year of trading for State Street's sector SPDR ETFs, the Utilities Select Sector SPDR (NYSE: XLU) is the best SPDR in June, averaging a barely noticeable gain in the six month of the year, according to CXO Advisory data.

What's interesting is that after June, XLU reverts to being the second-worst SPDR in July before occupying the top spot, on a historical basis, in August and September, according to CXO data.

Data suggest the Health Care Select Sector SPDR (NYSE: XLV), the largest healthcare ETF by assets, is the second-best SPDR in June. That makes June just one of three months in which XLV is one of the top two sector SPDRs. January and December are the others. Be careful when expecting a lot of XLV this month because, dating back to 1999, the ETF actually averages a modest June loss, according to CXO data.

As for the sector SPDRs to avoid this month, investors may want to only pay attention to one of these suggestions. Historical data say the Finacial Select Sector SPDR (NYSE: XLF) is usually the worst sector SPDR ETF in June, averaging a loss of nearly two percent. 

However, if the Federal Reserve moves forward with raising interest rates this month, it would not be surprising to see XLF rank as one of June's best-performing sector ETFs.

With an average June loss of 1.5 percent, the Industrial Select Sector SPDR (NYSE: XLI) is the second-worst of the sector SPDRs in June.

Todd Shriber owns shares of XLF.

Posted-In: Long Ideas Sector ETFs Short Ideas Trading Ideas ETFs Best of Benzinga


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