Market Overview

Best Sector ETFs For March: Banking On Oil

Best Sector ETFs For March: Banking On Oil

If historical trends hold true to form, the arrival of the third month of the year could be good news for equity investors. Over the past years, the S&P 500 averaged a March gain of 2.1 percent, making March the second-best month of the year for U.S. stocks. Only October is historically better.

With March usually being kind to stocks, sector-level opportunities are abound. In fact, none of the original nine sector SPDR exchange-traded funds average March losses. Among the best-performing sector SPDRs in March, both hail from widely followed sectors and one is up year-to-date while the other is mired in a slump.

Since 1999, the first full of year trading for the sector SPDR ETFs, the Financial Select Sector SPDR (NYSE: XLF) is usually the best-performing member of the suite in March, averaging a third-month gain of about 3 percent, according to CXO Advisory.

XLF, the largest financial services ETF by assets, is up 4 percent year-to-date. March is one of three months in which XLF ranks as the best sector SPDR fund on a historical basis.

Energizing With Energy

After ranking as one of the worst-performing sectors last year, energy started 2018 on a solid note, but that ebullience quickly evaporated. The Energy Select Sector SPDR (NYSE: XLE), the largest equity-based energy ETF by assets, is down almost 7 percent year-to-date.

Energy bulls are hoping XLE can live up to its historical reputation in March because the ETF is usually the second-best SPDR behind XLF in the third month of the year. XLE averages a March gain of just under 3 percent, according to CXO.

The February through April period marks a stretch in which XLE is the second-best sector SPDR for three consecutive months.

March Laggards

As was noted earlier, none of the sector SPDR ETFs average March losses, so deeming any of them “laggards” in third month of the year is a stretch. Interestingly, the March laggards among the sector SPDRs both track defensive sectors.

On a historical basis, the two worst-performing sector SPDRs in March are the Health Care Select Sector SPDR (NYSE: XLV) and the Consumer Staples Select Sector SPDR (NYSE: XLP), according to CXO.

Year-to-date, XLP is getting drubbed to the tune of a 6 percent loss while XLV is higher by 2.4 percent. Both ETFs average March gains of more than 1 percent.

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Disclosure: The author owns shares of XLF.


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