Market Overview

No Ides Of March For These Sector ETFs...Maybe

No Ides Of March For These Sector ETFs...Maybe

March is here, and if the third month of the year holds true to historical form, that is good news for those bullish on U.S. stocks.

Over the past 20 years, the S&P 500 posts an average March gain of 1.8 percent, ranking the month third behind April and October in terms of average monthly performance, according to

Sector ETFs

It is very likely a coincidence given the various interest rate environments investors will see over the years, but the sector exchange traded funds, as measured by the Sector SPDR ETFs, that traditionally perform well in March are cyclical and often respond well to higher interest rates. That said, bets are dwindling that the Federal Reserve will boost rates later this month, with many bond traders believing that move will come in May or June.

Related Link: Best Sector ETFs For January: Trying To Get Healthy

Dating back to 1999, the first full year of trading for the sector SPDR ETF suite, the Financial Select Sector SPDR (NYSE: XLF) is usually the best-performing member of the original nine sector SPDRs in March. XLF, the largest financial services ETF by assets, posts an average March gain of roughly 3.5 percent, according to CXO Advisory data.

Historical Perspective

So, if XLF and the S&P 500 stick to historical form, the financial ETF could offer nearly double the March returns of the benchmark U.S. equity index. That alone is impressive, but making XLF's March track record is the fact that few of the sector SPDRs average a gain of 3 percent or more in any month of the year. This year, XLF has been a favored destination for traders looking to bet on rising interest rates.

On a historical basis, the Industrial Select Sector SPDR Fund (NYSE: XLI), is the second-best SPDR in March, averaging a gain of almost 2.5 percent, according to CXO data. As one of the benchmark ETFs tracking a cyclical sector, XLI is seen as a play on rising rates as that move by the Fed can be viewed as a vote of confidence in the U.S. economy.

Underscoring the potential potency of stocks in March is the fact that none of the sector SPDRs average negative returns this month. One of this month's laggards, historically speaking, is the Health Care SPDR (ETF) (NYSE: XLV). XLV, the largest healthcare ETF, posts an average March gain of about 1.5 percent.

The Consumer Staples Select Sect. SPDR (ETF) (NYSE: XLP) is usually the worst sector SPDR in March, but that is not an indictment. XLP has an average March gain that slightly trails that of XLV, according to CXO.

Disclosure: Todd Shriber owns shares of XLF.

Image Credit: By Vincenzo Camuccini -, Public Domain, via Wikimedia Commons

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