“Historically, when the dollar is growing stronger at an accelerating rate, domestically oriented sectors such as consumer discretionary, financials, telecom, consumer staples, and health care have had the highest rate of outperformance among any of the sectors based on rolling one-year relative returns since 1975,” Chisolm added.


Consequently, given the earnings slowdown, strong USD and low oil prices, ETF investors should consider overweighting consumer staples, health care, telecom and utilities sectors to diminish portfolio volatility.

For defensive consumer staples exposure, investors can look to a number of sector-specific ETF options, such as the Consumer Staples Select SPDR (NYSEArca: XLP), Vanguard Consumer Staples ETF (NYSEArca: VDC) and Fidelity MSCI Consumer Staples Index ETF (NYSEArca: FSTA).

The Health Care Select Sector SPDR (NYSEArca: XLV), Vanguard Health Care ETF (NYSEArca: VHT) and Fidelity MSCI Health Care Index ETF (NYSEArca: FHLC) provide exposure to the broad health care group, including pharmaceuticals, biotechnology, health care providers, health services and health equipment firms.

Telecom ETFs, such as the Vanguard Telecommunication Services ETF (NYSEArca: VOX), iShares U.S. Telecommunications ETF (NYSEArca: IYZ) and Fidelity MSCI Telecommunication Services Index ETF (NYSEArca: FCOM), include exposure integrated telecom services companies, along with alternative carriers and wireless services.

Lastly, the Utilities Select Sector SPDR (NYSEArca: XLU), Vanguard Utilities ETF (NYSEArca: VPU) and Fidelity MSCI Utilities Index ETF (NYSEArca: FUTY) track electric, multi-utilities and water utilities plants.

The suite of State Street Sector SPDR ETFs have been a mainstay in many investment portfolios. Due to their large size and robust trading activity, the SPDR funds have been go-to options among large institutional traders whom want to execute tight spreads on large block orders. On the other hand, Vanguard and Fidelity options may be more attractive for long-term, buy-and-hold investors as they have lower annual fees and exhibit lower trading activity.

Investors should also consider what brokerage platform they are using as well, since some brokers offer commission-free trades on ETFs, which may further help lower overall fees.

For more information on market sectors, visit our sector ETFs category.