Markets tend to slow down in the summer months and conservative investors may look to put their money to work in defensive sector exchange traded funds (ETFs).
Utilities, health care and consumer staples sectors tend to be good defensive plays for a slowing market due to their stable profit stream since the products and services offered are required no matter what the occasion, reports David K. Randall for the Associated Press. As a result, investors have come to trust the reliable earnings that come from defensive companies. [Investors Play Defense with Consumer Staples ETFs.]
Additionally, defensive plays may provide a steady stream of income through dividend returns. Still, some investors may also be putting money back into these sectors because the companies have underperformed over the past few years. [FirstEnergy Earnings to Pace Utilities ETFs.]
Currently, these three defensive industries are up more than 5% this quarter, with the health care sector up 14.2% this year. Looking ahead, the high volume trading within these sectors bodes well for the groups since it indicates high investor interest in the areas.
Andrew Goldberg, a market strategist for J.P. Morgan Funds, opines that defensive stocks will continue to show strength as long as oil prices don’t become a burden to the overall economy.
- SPDR Consumer Staples Select Sector Fund (NYSEArca: XLP) is up 9.3% year-to-date.
- SPDR Utilities Select Sector Fund (NYSEArca: XLU) is up 7.3% year-to-date.
- SPDR Health Care Select Sector Fund (NYSEArca: XLV) is up 13.3% year-to-date.
For more information on investing in ETFs, visit our ETF 101 category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.