Market Overview

Best Sector ETFs For April: Trying Avoid April Showers

Best Sector ETFs For April: Trying Avoid April Showers

April is upon us and the fourth month is, historically, kind to equities. Over the past 20 years, the S&P 500 has risen in 75 percent of those Aprils, posting an average gain of 1.7 percent.

That ties April with March for the best average monthly performance by the S&P 500.

The Gainers

At the sector level, the groups that typically perform well in the fourth month of the year are cyclical sectors. The disclaimer is that seasonal trends do not always repeat.

Going back to 1999, the first full year of trading for the original nine sector SPDR exchange traded funds, the Energy Select Sector SPDR (NYSE: XLE) is usually the best sector SPDR ETF in the month of April.

XLE, the largest equity-based energy ETF by assets, averages an April gain of almost 4 percent, according to CXO Advisory. XLE is coming off a first quarter gain of more than 15 percent as the energy sector was one of the best-performing groups in the first three months of the year.

When first-quarter earnings reports start rolling, XLE will be tested by the usual suspects: Exxon Mobil Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX). The two largest U.S. oil companies combine for 41.71 percent of XLE's weight.

The second-best sector SPDR in April, usually, is another cyclical play: the Materials Select Sector SPDR (NYSE: XLB). XLB, the largest materials ETF, averages an April gain of just over 3 percent, according to CXO.

XLB notched a first-quarter gain of almost 10 percent. Interestingly, April is one of six months in which XLB is either the best or second-best sector SPDR on a historical basis.

The Laggards

Another interesting tidbit is that, historically speaking, each of the original nine sector SPDR ETFs average April gains. However, there are some “laggards” in the group.

That dubious distinction is assigned to the Consumer Staples Select Sector SPDR (NYSE: XLP) and the Technology Select Sector SPDR (NYSE: XLK). XLP averages an April gain of just under 1 percent while XLK's average April gain is slightly above 1 percent, according to CXO data.

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