December is here and with the arrival of the final month of 2014 comes one of the best months of the year for stocks.
December is the second month in the best six-month period in which to be long stocks. Over the past 20 years, the S&P 500 has posted an average December gain of 1.6%, putting it in a tie with November and March as the third-best month for the benchmark U.S. index over that period.
With that seasonality in mind, devoted followers of seasonal trends also know that with each new month comes the opportunity for some sectors to outshine others. For sector exchange traded funds, December brings the continuation of a seasonal pattern that typically starts in November. That trend being success for the materials sector.
The Materials Select Sector SPDR (NYSEArca: XLB) has been the best of the nine SPDRs in December since the suite’s first full trading year in 1999, according to CXO Advisory.
XLB’s December strength follows what are usually strong performaw component DuPont (NYSE: DD) and Dow Chemical (NYSE: DOW), is coming off a November gain of 2.3%. The ETF’s average December gain since 1999 is about 3%, according to CXO data. [Best Sector ETFs for November]nces by the largest materials ETF in November when XLB is also the top-performing SPDR. XLB, home to familiar names such as Do
What is even more interesting than XLB usually being the best sector SPDR ETF in December is which fund is second-best. That honor goes to the currently imperiled Energy Select Sector SPDR (NYSEArca: XLE).
XLE, the largest equity-based energy ETF, has an average December gain of just over 2.5% dating back to 1999, according to CXO data. With oil prices sliding, things could be much different for XLE and rival energy ETFs this year. Although investors poured over $1.1 billion into the fund last month, XLE slid 7.3% while the S&P 500 gained 2.5%. [Traders Dodge Bearish Oil ETFs]
As for the two worst sector SPDRs in December, that dubious honor belongs to the Consumer Staples Select Sector SPDR (NYSEArca: XLP) and the Technology Select Sector SPDR (NYSEArca: XLK), though it should be noted both ETFs usually generate small December gains.
XLP could be plagued by rich valuation multiples, but the outlook is a bit more sanguine for XLK. Not only are multiples on large-cap, mature tech names reasonable, but XLK, the largest technology sector ETF, is historically the second-best SPDR in January, according to CXO data..
Materials Select Sector SPDR
