Cyclical sector exchange traded funds were, for the most part, laggards in 2014. For example, the Industrial Select Sector SPDR (NYSEArca: XLI) and the Consumer Discretionary Select Sector SPDR (NYSEArca: XLY) posted an average of 2014 return of about 10%.

Investors that stuck with more boring, less volatile sectors did far better as the Consumer Staples Select Sector SPDR (NYSEArca: XLP) gained 15.7% while the Utilities Select Sector SPDR (NYSEArca: XLU) thrived on the back of plummeting 10-year Treasury yields to surge almost 29%.

However, now that the bull market is aging, late-cycle sectors and the corresponding ETFs could be in play this year.

“Differentiation between sectors will also drive returns at this point in the cycle, especially when important economic and market themes come into play. For example, the rout in oil prices in the second half of 2014 primarily affected the energy sector but over the next several quarters, lower energy prices should benefit consumer sectors,” said J.P. Morgan Asset Management in a note out earlier this year.

Among cyclical sectors that look attractively valued, according to J.P. Morgan Asset Management, is technology. The Technology Select Sector SPDR (NYSEArca: XLK) is an example of a cyclical ETF that did outperform last year with a gain of 18%. Still, investors were leery of embracing big tech names and pulled over $1.5 billion in 2014. [Finally Some Love for a Big Tech ETF]

“Dispersion between sector valuations should continue to grow. For example, technology stocks appear attractive based on both forward and trailing P/E ratios when compared with their long-run histories. In contrast, the utilities sector, which many have used as a bond substitute, looks expensive on both measures,” said J.P. Morgan in the note.

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