ETF Trends
ETF Trends

Even with Wednesday’s tumble, the S&P 500 was able to notch a first-quarter gain of about half a percent, extending its run of consecutive positive quarters to nine.

April is here and with the arrival of the fourth month of the year comes the arrival of the last month in the strongest six-month cycle for stocks. The good news is that April is often the best month of the year for the S&P 500. Over the past 20 years, the S&P 500 has risen in 75% of Aprils, posting an average gain of 2.2%, according to EquityClock.com.

As is always the case when a new month begins, new sector-level opportunity arrives for investors. What is interesting about the sector ETFs with a propensity for delivering strong April performances is that the two funds to be highlighted here are believed to be beneficiaries of higher interest rates.

In terms of the nine sector SPDRs, the largest suite of sector ETFs, the Industrial Select Sector SPDR (NYSEArca: XLI) is usually the top April performer. Going back to 1999, the first full year of trading for the sector SPDRs, XLI has posted an average April gain of nearly 4%, according to CXO Advisory.

The technology, industrial and materials companies are among cyclical sectors that typically strengthen in a rising rate environment as investors turn away from safer assets and shift into riskier areas of the market. Even with the idea that interest rates will rise being a foregone conclusion in some circles, XLI, the largest industrial ETF, is off 1.3% year-to-date.

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