August isn't the worst month of the year for stocks. It's not the best one, either. Over the past 20 years, the S&P 500 averages an August loss of 0.20%.
The benchmark U.S. equity gauges averages a loss in five months of the year and the August loss is the lowest of those five.
At the sector level, August is like any other month: there are winners and losers. However, the eighth month of the year requires investors be choosy because just three of the nine original sector SPDR exchange-traded funds average gains this month.
Here are the top two sector SPDRs, on a historical basis, in August, followed by the two worst laggards.
Technology Select Sector SPDR (XLK)
The Technology Select Sector SPDR XLK averages a modest August, but it's enough to make the leader of the sector SPDR pack, according to CXO Advisory data.
XLK is coming off a 5.51% gain in July and, as usual, its fortunes this month will boil to scorching hot Apple AAPL and Microsoft MSFT. Those stocks combine for about 43% of XLK's weight.
August marks the start of an interesting three-month stretch in which XLK is the best sector SPDR before becoming the second-worst in September only to be the best again in October.
Utilities Select Sector SPDR (XLU)
The Utilities Select Sector SPDR XLU posts a small August gain. XLU's historical August bullishness jibes with the conservative posture many investors look to take during the slow summer months. The fund, the largest utilities ETF, jumped 5.33% last month and yields 3.44%, which is meaningful in today's low yield environment.
XLU may be worth holding on to because it's also the second-best SPDR in September.
Materials Select Sector SPDR (XLB)
The Materials Select Sector SPDR XLB averages an August loss of about half a percent, but things could be different for the largest materials ETF this year because it's coming off a July gain of almost 7%. On the other hand, XLB is also one of the two worst sector SPDR ETFs in September, indicating this is a risky seasonal period for the ETF.
Energy Select Sector SPDR (XLE)
The Energy Select Sector SPDR XLE averages an August loss of almost 1%, according to CXO. If that historical form holds true, that would actually qualify as a decent month in 2020 for XLE. The fund lost 2.44% last month following an almost 4% loss in the last week of July. XLE is now down 40% this year.
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