How Sector ETF Investors Performed in the Historically Weak Summer Period

In the traditional slow period of the year, many investors have engaged in the time-honored tradition of “Sell in May,” capitalizing on defensive and high-yielding sector exchange traded funds that usually outperform in the May Through October timeframe.

Historically, consumer staples and health care sectors outperform during the slow period of May through October while high-yielding real estate and utilities topped the charts as well, Lindsey Bell, Investment Strategist for CFRA, said in a research note.

However, there were some surprises this time around. For instance, the technology sector, along with related ETFs like the Technology Select Sector SPDR (NYSEArca: XLK), Fidelity MSCI Information Technology Index ETF (NYSEArca: FTEC) and Vanguard Information Technology ETF (NYSEArca: VGT), have dominated markets this year, bolstering markets and lifting the S&P 500 toward record highs.

Additionally, utilities stocks, along with sector-related ETFs like Utilities Select Sector SPDR (NYSEArca: XLU), Vanguard Utilities ETF (NYSEARCA: VPU) and Fidelity MSCI Utilities Index ETF (NYSEARCA: FUTY), took charge once the seasonal period began. Since May 1, utilities gained 7.1%, compared to the 2.3% rise in the S&P 500 and 6.0% increase in the tech sector.

Furthermore, utilities shows a robust 3.4% yield, the second highest in the S&P 500, which has been particularly attractive in a stubbornly low-yielding environment. The sector is also the third best performer since the start of the year, jumping 13% and only lagging behind the 22% gain in tech and 15 increase in health care. On average since 1990, utilities have outperformed the S&P 500 46% of the time between the May and October months., making it the fifth best performing sector over the period.

“This year’s outperformance has been a noticeable outlier as investors searched for yield from a sector with a defensive hedge,” Bell said.