Germany ETF: A Compelling Seasonal Play

Seasonal trends affect a variety of sector exchange traded funds. Commodities ETFs also show some noticeable seasonal tendencies.

For example, October is usually unkind to gold, but November is often a good time to own the yello metal. At the sector level, cyclical plays, such as consumer discretionary, industrial and materials ETFs, perform well starting in November. As the calendar turns to late spring and early summer, consumer staples ETFs can offer some insulation from a seasonal slump for the broader market. [Industrial ETFs: November Strong]

There are some distinct seasonal trends for country ETFs as well. Take the example of the iShares MSCI Germany ETF (NYSEArca: EWG), the largest Germany ETF by assets. Over the last 14 years, November and December have been good months in which to be long EWG.

In November/December comparison of EWG against the SPDR Dow Jones Industrial Average (NYSEArca: DIA) and the PowerShares QQQ (NasdaqGS: QQQ) over the past 14 years, EWG looks good. “With an average return above 7% in two months, a 22% drawdown, and only two losing years, the winner is EWG,” writes Fred Piard, author of Quantitative Investing.

Comparing the equity cover of holding EWG in November and December against the SPDR S&P 500 (NYSEArca: SPY) yields stunning results.

“The total return is 174.8 % and the standard deviation is 12.6 % for EWG two months a year. They are respectively 86.9 % and 23.9 % for SPY,” writes Piard.