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.
EWG is up 19.8% year-to-date compared to an 18.3% gain for the Vanguard FTSE Europe ETF (NYSEArca: VGK). Piard’s analysis notes that EWG has only produced a negative November/December performance twice over the past 14 years – a 4% loss in 2002 and a 2.8% loss in 2011. EWG rose 7.1% in the November/December time frame in 2012. [Germany ETFs for a Stalwart Economy]
iShares MSCI Germany ETF
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of QQQ and SPY.
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.