Seasonal Trends May Support Semiconductor ETFs

Many typically markets will stagnate during the summer doldrums, but returns aren’t all bad as sector picks matter. For example, semiconductor exchange traded funds may enjoy their time in the sun.

“Often tech takes the most heat for wilting in the summer,” according to a Direxion note that looks at historical sector performances over the last 25 years. “But according to the historical data, it’s simply not true for semiconductors. Granted they do underperform their own high returns for the year; however, over the summer they do very well with a 1.12% monthly average return, an impressive outperformance compared to the S&P 500’s slightly negative return.”

Semiconductors have historically outperformed during the summer months, returning 1.1% on average. However, that does not mean the sector is without risks. For example, President Donald Trump has pushed for restrictions on trade barriers with China, which might pose a threat to the sector. China is a key market for the global semiconductor industry, consuming more than $100 billion worth of semiconductors or roughly one-third of the world population.