Entering Tuesday, the S&P 500, the benchmark U.S. equity index, sports a modest year-to-date loss of 0.12 percent. That would seem to imply it was a boring year for U.S. stocks and exchange-traded funds that track the S&P 500.
However, this year was anything but boring the myriad ETFs that track indexes that are derivatives of the S&P 500. ETF issuers obliged that trend by bringing new S&P 500 off-shoot products to market this year.
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Many of the weak stocks in the S&P 500 index were in the energy sector, which was plagued by low commodity prices. Indeed the three worst performers in the index, all part of the energy sector, were down more than 70 percent for the year. According to Howard Silverblatt, senior index analyst with S&P Dow Jones Indices, excluding the energy sector that was down 22 percent from the broader index would have resulted in a 200 basis point improvement in the year to date gains for the S&P 500 index, said S&P Capital IQ in a note out Monday.
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SPXE's Recent Success
The research firm highlighted the ProShares S&P 500 Ex-Energy ETF (NYSE:SPXE) as an option for investors looking to maintain S&P 500 exposure while dodging flailing energy stocks. SPXE, which debuted in September as part of a three-ETF suite of ProShares Ex-Sector ETFs, has slightly outperformed the traditional S&P 500 since coming to market.
With energy out of the equation, SPXE ratchets up its exposure to technology stocks to the tune of almost 22.5 percent and financial services names to almost 17.9 percent. Those allocations are well in excess of what the traditional S&P 500 devotes to those sectors.
Others Thrived As Well
Low volatility ETFs have also thrived this year and that group includes the PowerShares Exchange-Traded Fund Trust II (NYSE:SPLV). SPLV, one of the largest low volatility ETFs, tracks an index comprised of the 100 least volatile S&P 500 stocks as measured on a trailing 12-month basis.
SPLV is up 4.6 percent, significantly outperforming the 11 percent loss of PowerShares S&P 500 High Beta Portfolio (PowerShares Exchange-Traded Fund Trust II (NYSE:SPHB)). SPLV excludes approximately 400 most risky stocks in the broader index, while SPHB excludes a similar number of least risky stocks, said S&P Capital IQ.
Low volatility stocks could be winners again in 2016 due to divergent global monetary policies. That is exactly what investors are dealing with as the Federal Reserve ebbs closer to its first interest rate hike in nine years, while the Bank of Japan, the European Central Bank and others engage in easy monetary policies.
SPLV's top holdings include well-known consumer products giants such as Clorox Co (NYSE:CLX), Procter & Gamble Co (NYSE:PG) and The Coca-Cola Co (NYSE:KO).
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