Although staples stocks have a tendency to underperform as rates, the Consumer Staples Select Sector SPDR (NYSEArca: XLP) did not trail the S&P 500 by much from 2004 through 2006. As has been noted, bank stocks are waiting on higher rates and it is easy to see why. The Financial Select Sector SPDR (NYSEArca: XLF) jumped 40.3% over the aforementioned rate hike cycle. [Bank ETFs Waiting on Higher Rates]
The Industrial Select Sector SPDR (NYSEArca: XLI) and the Materials Select Sector SPDR (NYSEArca: XLB) also outperformed during that last time rates rose, indicating cyclical sector prove durable even as borrowing costs climb.
However, the standout among the nine sector SPDR ETFs from 2004 through 2006 (it is not even close) was the Energy Select Sector SPDR (NYSEArca: XLE). XLE, the largest energy ETF, surged nearly 122% over that period.
Chart Courtesy: ETF Replay