Sector ETFs For November: Time For Laggards To Lead

Year-to-date, five of the nine sector SPDR exchange-traded funds issued by State Street Global Advisors (SSgA) have traded lower. The Energy Select Sector SPDR (ETF) (NYSE:XLE) is the most egregious offender of the lot with a 12.2 percent year-to-date loss. Perhaps the Utilities SPDR (ETF) (NYSE:XLU) and its nearly 5 percent decline deserve a pass due to all the debate over interest rates.

For some of the other sector laggards, the time could be right to turn the tables and finish 2015 on a strong note. Sometimes, a change of the calendar helps. Seasonal factors work best when combined with other, more scientific trading approaches, but it is worth noting that the two sector SPDRs that typically perform the best in November are highly cyclical funds. They are also of the two of this year's five laggards.

Materials ETF

Start with the Materials Select Sector SPDR (NYSE:XLB), which according to CXO Advisory data, is historically the best-performing SPDR in November.

XLB, the largest materials ETF, has posted an average November gain of nearly 3 percent since 1999, the first full trading year for the sector SPDR suite.

XLB comes into November with a 5.5 percent year-to-date loss, placing it as second worst among the nine SPDRs. However, XLB may have gotten a head start on its positive seasonality by surging 13.4 percent in October.

Investors should note that XLB's seasonal ebullience is not confined to November, as the ETF is also the best of the nine SPDRs in December, according to CXO.

Industrials ETF

The Sector Spdr Trust Sbi (NYSE:XLI) is usually the second best of the nine SPDRs in November, posting an average gain of just over 2 percent in the eleventh month of the year, according to CXO data. However, in XLI's case, the ETF did not get a head start on its favorable seasonality, as it fell by a third of a percent in October.

What's Happening This Year?

Here is an interesting tidbit that explains the struggles of XLB and XLI this year. Fourteen (14) of the 30 members of the Dow Jones Industrial are currently saddled with year-to-date losses. One, E I Du Pont De Nemours And Co (NYSE:DD), resides in XLB, while three of the other 13 are major holdings in XLB.

Notable is the fact that XLI is also the second best of the SPDRs in December.

And as for the sector ETFs that typically disappoint in November, the Select Sector Financial Slct Str SPDR Fd (NYSE:XLF) historically notches a negative performance, while XLU (the largest utilities ETF) is the worst of the positive performers, according to CXO.

Todd Shriber owns shares of XLF.

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