Sector ETF Ideas for August: Getting Conservative

The long XLP and long XLU thesis has some points in its favor as August starts. Treasury yields are declining and investors appear comfortable with the notion that there are at least several months ahead before the Federal Reserve raises interest rates.

Additionally, seasonal sector trends have shelf lives, but once August 31st rolls around, investors do not need to dump XLP and XLU. Historical data show that in September, XLU is usually the best of the nine SPDRs followed by XLP.

As for the sector SPDRs to avoid this month, CXO data indicate the Consumer Discretionary Select Sector SPDR (NYSEArca: XLY) and the Materials Select Sector SPDR (NYSEArca: XLB) are usually the two worst SPDRs in August. Be careful with XLB because it is also the worst SPDR in September on a historical basis.

Consumer Staples Select Sector SPDR