The S&P 500 enters Monday on a six-day losing streak and is coming off a 4.2% gain last week, one of its best weekly performances this year.
With last week’s gains, the S&P 500 comes into Monday down just 0.6% this month, putting the benchmark U.S. index to end October, often the most volatile month of the year for stocks, on a positive note. If inflows to sector exchange traded funds are used as a guide, it seems obvious that investors are leaning toward safer sectors even in the wake of last week’s rally.
After sitting on about $1.1 billion in October inflows, the Energy Select Sector SPDR (NYSEArca: XLE) was stung by almost $966 million of outflows late last week. Prior to those redemptions, XLE was one of the top-10 ETFs in terms of fourth-quarter inflows and by far the best sector ETF by that metric. [Returning to Energy ETFs]
Top honors for assets added among sector ETFs in the current now belong to the Consumer Staples Select Sector SPDR (NYSEArca: XLP). XLP, the largest consumer staples ETF by assets, has hauled in almost $972 million in new assets this quarter, a total exceed by just seven other ETFs. Five of those ETFs are bond funds and XLP is now the leader among sector ETFs for fourth-quarter inflows. [Staples ETFs are Loving This Market]
XLP jumped 2.7% last week and although that lagged the S&P 500’s weekly gain, the ETF is up 2.4% this month and resides just pennies away from its all-time high while the S&P 500 is still sitting in the red for October.
XLP’s October performance is made all the more impressive when considering that Coca-Cola (NYSE: KO), the ETF’s second-largest holding at a weight of 9.5%, is one of 17 Dow stocks that have traded lower over the past month. Following a weak earnings update last weeek, Coca-Cola, a favorite holding of Warren Buffett’s Berkshire Hathaway (NYSE: BRK-A), experienced its worst one-day performance in at least six years. Shares of the world’s largest soft drink maker are down 3% in the past month.
The good news for XLP shareholders is that of the 13 Dow stocks that have traded higher over the past month, two are Procter & Gamble (NYSE: PG) and Wal-Mart (NYSE: WMT), which are also large Berkshire equity positions. P&G and Wal-Mart, XLP’s largest and fourth-largest holdings, respectively, combine for 20.4% of the ETF’s weight. [Playing Defense With Staples ETFs]
“During the past 10 years, this ETF has been meaningfully less volatile than the broader market. It also has displayed less volatility than competing consumer staples ETFs,” Morningstar analyst Robert Goldsborough said in a research note on XLP.
Consumer Staples Select Sector SPDR
Tom Lydon’s clients own shares of XLP.