After a slow January aside, U.S. stocks loved the month of love as the major U.S. indexes notched solid gains. Heading into the close Friday, the S&P 500 and Dow Jones Industrial Average were sporting February gains of more than 5% while the Nasaq Composite climbed more than 7%.
Now March is here and that might be good news for investors looking for more upside in U.S. stocks. Over the past 20 years, the S&P 500 has posted an average March gain of 1.9%, tying the third month of the year with November as the second-best month in best six-month period in which to own stocks. The S&P 500 has risen in 75% of the past 20 Marches, according to EquityClock.com.
For tactical investors, the arrival of March also brings sector-level opportunity. Investors willing to make bets on the sector exchange traded funds that typically perform well in March will, this year, be making wagers on some funds that have been laggards on a year-to-date basis.
The Financial Select Sector SPDR (NYSEArca: XLF) is usually the top performer among the nine sector SPDR ETFs in the month of March. Since 1999, the first full year of trading for the sector SPDR suite, XLF has posted an average March gain north of 3%, according to CXO Advisory data.
The Energy Select Sector SPDR Fund (NYSEArca: XLE), which is usually the best performer in February, is the second-best of the nine SPDRs, on a historical basis, in March. XLE, the largest equity-based energy ETF, posts an average March gain of almost 3%, according to CXO Advisory.
Assuming oil prices cooperate, March can serve as an extension of XLE’s favorable seasonality that began last month. Although the ETF was not the best of the nine sector SPDRs in February, it did post a modest gain. [Sector Ideas for February]
Year-to-date, XLE and XLF have fallen modestly, putting the pair among just three sector SPDRs that are down this year. Only the interest rate-sensitive Utilities Select Sector SPDR (NYSEArca: XLU) has performed worse than XLE and XLF this year. [Rate-Sensitive ETFs Get Jammed Up]
Perhaps just as interesting as which sector SPDRs typically thrive in March are the ones that lag in the year’s third month.
Since 1999, the Health Care Select Sector SPDR (NYSEArca: XLV), the second-best SPDR on a year-to-date basis, is usually the second-worst of the nine SPDRs in March, according to CXO data. Only the Consumer Staples Select Sector SPDR (NYSEArca: XLP) performs worse than XLV in March.
The good news is investors need not worry too much about XLV and XLP this month because they usually post an average March gain of more than 1%, according to CXO.
Financial Select Sector SPDR
