October, often the most volatile month of the year for stocks, delivered volatility as expected, but when all was said and done, the S&P 500 finished the tenth month of the year higher by nearly 3.8%.
It was not a bad month for the two sector SPDR exchange traded funds that are usually the best of the nine in October. The Technology Select Sector SPDR (NYSEArca: XLK) and the Consumer Discretionary Select Sector SPDR (NYSEArca: XLY) gained an average of 3.4% last month. [October’s Best Sector ETFs]
Now November is here and with the arrival of the eleventh month of the year comes the arrival of the best six-month period in which to own stocks. Knowing that November marks the start of the seasonably favorable six-month period would seem to encourage some risk-taking with sector ETFs and that is indeed the case as higher beta, late cycle plays often shine this month.
For example, the Materials Select Sector SPDR (NYSEArca: XLB) has been the best of the nine SPDRs in November since the suite’s first full trading year in 1999, according to CXO Advisory.
Since 1999, XLB, the largest materials ETF, has posted an average November gain of close to 3%, according to CXO. The ETF, home to familiar names such as Dow component DuPont (NYSE: DD) and Dow Chemical (NYSE: DOW), is coming off a disappointing performance last month that saw the ETF trade slightly lower.
Keeping with the theme of late cycle sector ETFs flourishing in November, the Industrial Select Sector SPDR (NYSEArca: XLI) is historically the second-best SPDR this month. XLI, the largest industrial ETF, has an average November gain of just over 2% dating back to 1999. The ETF is already showing signs of promise as it surged nearly 6% last month. [Help for Industrial ETFs]
Getting back to XLB for a moment, investors will not need to throw in the towel on the ETF when November ends because the fund is also the best of the nine SPDRs in December and the second-best in February.
Historically, the two worst SPDRs this month are the Utilities Select Sector SPDR (NYSEArca: XLU) and the Financial Select Sector SPDR (NYSEArca: XLF), according to CXO. While XLU usually manages a modest November gain, XLF’s average November performance is negative.
Materials Select Sector SPDR
ETF Trends editorial team contributed to this post.