The month of August has historically been a poor month for equities. Nevertheless, exchange traded fund investors may do well with focusing on more conservative sectors while growth sectors languish.
According to data analytics platform Kensho, August has been the worst month of the year for the S&P 500, with the indexing falling 0.8% on average in August since 1987, reports Deirdre Bosa for CNBC. [Sector ETF Ideas for August: Getting Conservative]
For those who are wary of a potential pullback in the S&P 500 index this month, there are a number of bearish or inverse ETF options with varying levels of leveraged exposure to capitalize off a weakening S&P 500. The ProShares Short S&P500 (NYSEArca: SH) takes a simple inverse or -100% daily performance of the S&P 500 index. Alternatively, for the more aggressive trader, leveraged options include the ProShares UltraShort S&P500 ETF (NYSEArca: SDS), which tries to reflect the -2x or -200% daily performance of the S&P 500, the Direxion Daily S&P 500 Bear 3x Shares (NYSEArca: SPXS), which takes the -3x or -300% daily performance of the S&P 500, and ProShares UltraPro Short S&P 500 ETF (NYSEArca: SPXU), which also takes the -300% daily performance of the S&P 500. [Inverse S&P 500 ETF Ideas to Hedge a Correction]
However, sifting through market segments, investors may find that utility stocks typically outperform during the August weakness. For the month of August, the sector has produced a positive return over 75% of the time and returned 2.5% or more on average.
Investors who are interested in the defensive play can take a look at a number ETF options, including the Utilities Select Sector SPDR (NYSEArca: XLU), Vanguard Utilities ETF (NYSEArca: VPU) and iShares U.S. Utilities ETF (NYSEArca: IDU).
On the other hand, technology stocks have consistently underperformed the broader markets, with the S&P 500 IT Index trading lower more than half the time in August, declining 0.5% on average over the past 25 years.
More aggressive traders may hedge against a dip in tech stocks through inverse ETFs. For instance, the ProShares UltraShort Technology (NYSEArca: REW) takes the -2x or -200% daily performance of the Dow Jones U.S. Technology index and the Direxion Daily Technology Bear 3X Shares (NYSEArca: TECS) reflects the -3x or -300% daily performance of the S&P Technology Select Sector Index. [Inverse Tech ETFs to Hedge Bubble Concerns]
In August, gold has finished in positive for four of the past five years. Gold has also produced a 6% average return over the past five years. Additionally, miners also generated outsized returns during August after recovering from a July sell-off.
Investors can track gold through physical bullion-backed ETFs, including the SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL). For gold miners exposure, investors may take a look at the Market Vectors Gold Miners ETF (NYSEArca: GDX), Market Vectors Junior Gold Miners ETF (NYSEArca: GDXJ) and Sprott Junior Gold Miners ETF (NYSEArca: SGDJ). [Oversold Gold Miner ETFs May Have Opportunity to Rebound]
For more information on market sectors, visit our sector ETFs category.
Max Chen contributed to this article.