Market Overview

Best Sector ETFs For August: An Interesting Mix

Best Sector ETFs For August: An Interesting Mix

August starts today and with the arrival of the eighth month of the year comes a month that's usually negative for stocks, but not by much. Over the past two decades, the S&P 500 posts an average August loss of 0.10%, making it the best of the five months in which the benchmark U.S. equity gauge averages a loss.


Using the nine original sector SPDR exchange traded funds as the barometers, sector-level performance is mixed in August with little in the way of noticeable upside. Historically, the best-performing sector SPDR ETF in August is the Technology Select Sector SPDR (NYSE: XLK).

XLK, the largest technology ETF by assets, averages an August gain of just under 1%, according to CXO Advisory. XLK, which allocates over 36% of its combined weight to shares of Microsoft Corp. (NASDAQ: MSFT) and Apple Inc. (NASDAQ: AAPL), is coming of a July in which it gained almost 2%.

The benchmark tech ETF is, if historical trends hold true to form, entering an interesting three-month stretch. XLK is usually the best sector SPDR ETF in August before transitioning to the second-worst in September only to be the best again in October, according to CXO data.


In what appears to be a coincidence given that the Federal Reserve cut interest rates on Wednesday, the Utilities Select Sector SPDR (NYSE: XLU) is usually the second-best sector SPDR ETF in August, averaging a modest gain.

Following the Fed's Wednesday rate cut of 25 basis points, perhaps this August will bring more excitement for XLU, a rate-sensitive ETF that actually traded lower following yesterday's Fed announcement. XLU also ranks as the second-best SPDR in the month of September, according to CXO data.


While cyclical sectors are often supported by rate cuts, two of those groups are looking to shed historically poor August trends. The Consumer Discretionary Select Sector SPDR (NYSE: XLY) and the Materials Select Sector SPDR (NYSE: XLB), the largest ETFs tracking those sectors, average slight declines in August.

August marks the start of a two-month stretch in which XLB ranks as the worst sector SPDR ETF in both months. The materials ETF lost 1.03% in July.

Related Links:

A Practical International ETF

Gold ETFs Likely To Remain Hot


Related Articles (XLK + XLU)

View Comments and Join the Discussion!

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