Market Overview

Best Sector ETFs For February: Getting Cyclical...Sort Of

Best Sector ETFs For February: Getting Cyclical...Sort Of

February is here, and although the second month of the year resides in the stronger of the two six-month periods for stocks, this month is not known for jaw-dropping equity returns. Over the past two decades, the S&P 500 has posted an average loss of 0.2 percent, according to


However, as is the case with the other 11 months of the year, there are sector-level opportunities for tactical investors this month. The sectors and the related exchange traded funds that typically thrive in February or cyclical in nature, but investors should be careful with the cyclical theme because some of February's worst-performing sector ETFs are also cyclical plays.

February's Darlings

Without further ado, the best-performing member of the sector SPDR suite in February, dating back to the suite's first full year of trading in 1999, is the Materials Select Sector SPDR (NYSE: XLB). XLB, the largest materials ETF by assets, posts an average February gain of nearly two percent, according to CXO Advisory data.

XLB is in fine form to start 2017 after posting a 4.5 percent gain in January and that is after the benchmark materials ETF gained nearly 17 percent in 2016. February is one of five months in which XLB is one of the two best sector SPDRs.

Other Sector ETFs Dear To February's Heart

Speaking of sector SPDR ETFs that were stellar performers last year and, historically, do well in February there is the Energy Select Sector SPDR (ETF) (NYSE: XLE). After soaring 28 percent last year, XLE is scuffling to start 2017 after slumping 3.2 percent in January. XLE, the largest equity-based energy ETF, posts an average February gain of over one percent, according to CXO data.

Not So Special Sectors For February

Several sector SPDR ETFs have, historically, notched negative showings in February and the Technology SPDR (ETF) (NYSE: XLK) is one of those funds. After Apple Inc. (NASDAQ: AAPL)'s after-hours surge of three percent Tuesday on a bullish earnings report, it is possible that XLK defies its historical precedent this month as the iPhone maker is its largest holding.

XLK's average February worse is just over one percent, but that is not nearly as bad as the nearly two percent typically lost by the Financial Select Sector SPDR Fund (NYSE: XLF) in February, according to CXO data. That makes the largest financial services ETF the worst-performing member of the sector SPDR suite in the second month of the year.

Disclosure: Todd Shriber owns shares of XLF.

Image Credit: By Johntex - Johntex, CC BY 2.5, via Wikimedia Commons


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