Many investors are turning to traditional defensive sectors and dividend exchange traded funds to weather the volatility in the stock market.
SPDR S&P 500 ETF (NYSEArca: SPY) fell 6.6% last week on worries Greece will default and accelerate the European debt crisis.
The S&P 500 has suffered through seven weekly declines in excess of 2% this year, which is 20% more than normal on an annualized basis, says Sam Stovall, equity strategist at Standard & Poor’s.
Since the end of 1995, the blue-chip index has suffered 133 weeks in which it shed 2% or more. Eight of the sectors in the S&P 500 have seen more weekly declines of at least 2% during this period. However, utilities and consumer staples have seen fewer.
Utilities, consumer staples and healthcare stocks are considered defensive sectors. [ETF Flows Suggest Defensive Sector Rotation]
These three industries also have the lowest beta relative to the S&P over the past five years, according to Stovall. Lower beta means the sectors were less volatile than the overall S&P 500. ETFs tracking these defensive sectors include Consumer Staples Select Sector SPDR Fund (NYSEArca: XLP), Utilities Select Sector SDPR Fund (NYSEArca: XLU) and Health Care Select Sector SPDR Fund (NYSEArca: XLV).
“Looking at volatility from a different perspective, we see that within the S&P 500, the stocks that pay a dividend recorded less of an average year-to-date decline than those that paid no dividend,” the strategist added in a report Monday. Dividend payers also had a lower beta than non-payers. [Dividend ETFs See Rapid Growth]
SPDR S&P Dividend ETF (NYSEArca: SDY)
