Market Overview

A Pair Of Super Cyclical ETFs For November

A Pair Of Super Cyclical ETFs For November

Today is the first day of November. Historically speaking, that's good news for stocks because over the past two decades, the S&P 500 has averaged November gains of 1.2%, making the 11th month of the year the fourth-best in terms of gains for the benchmark U.S. equity gauge.

As was noted in this space, November kicks off the best six-month period for stocks and that often includes pronounced bullishness for cyclical sectors. Going back to 1999, the first full year of trading for the original nine sector SPDR exchange traded funds, data confirm that it pays to get cyclical starting in November.

Best Of The Best?

Case and point: the Materials Select Sector SPDR (NYSE: XLB), the largest ETF dedicated to that sector is usually the best-performing sector SPDR fund in November. XLB averages a November gain of nearly 3%, according to CXO Advisory data.

That's impressive stuff when considering all nine of the original sector SPDR ETFs average positive November returns. XLB is coming off a 4.26% gain in October.

But Keep An Eye On...

Here's where things get interesting in terms of November sector seasonality. The Industrial Select Sector SPDR (NYSE: XLI) is usually the second-best SPDR this month, also averaging a gain of just under 3%, according to CXO data.

What makes XLI bullishness an interesting proposition for November is that the thesis may have been dealt a blow on news that China is balking at the idea of comprehensive trade agreement. That's problematic for some XLI components, including Caterpillar (NYSE: CAT).

Still, XLI is coming off an impressive 5.61% October gain, one that was accrued against the backdrop of controversy surrounding Boeing (NYSE: BA) and weak earnings from Caterpillar and 3M (NYSE: MMM).

Jingle Bells

Normally, we'd look at the worst performers among the SPDRs for November, but since they all generate gains on a historical basis, it may be instructive to peak toward December.

That peak is relevant because XLB and XLI also rank as the top sector SPDRs in the last month of the year. November and December are two of six months in which XLB is usually the best or second-best of the sector SPDR ETFs.

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