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2 Sector ETF Winners And 2 Duds For August

ETF Professor

August isn't the worst month of the year for stocks. It's not the best one, either. Over the past 20 years, the S&P 500 averages an August loss of 0.20%.

The benchmark U.S. equity gauges averages a loss in five months of the year and the August loss is the lowest of those five.

At the sector level, August is like any other month: there are winners and losers. However, the eighth month of the year requires investors be choosy because just three of the nine original sector SPDR exchange-traded funds average gains this month.

Here are the top two sector SPDRs, on a historical basis, in August, followed by the two worst laggards.

Technology Select Sector SPDR (XLK)

The Technology Select Sector SPDR (NYSE: XLK) averages a modest August, but it's enough to make the leader of the sector SPDR pack, according to CXO Advisory data.

XLK is coming off a 5.51% gain in July and, as usual, its fortunes this month will boil to scorching hot Apple (NASDAQ: AAPL) and Microsoft (NASDAQ: MSFT). Those stocks combine for about 43% of XLK's weight.

August marks the start of an interesting three-month stretch in which XLK is the best sector SPDR before becoming the second-worst in September only to be the best again in October.

Utilities Select Sector SPDR (XLU)

The Utilities Select Sector SPDR (NYSE: XLU) posts a small August gain. XLU's historical August bullishness jibes with the conservative posture many investors look to take during the slow summer months. The fund, the largest utilities ETF, jumped 5.33% last month and yields 3.44%, which is meaningful in today's low yield environment.

XLU may be worth holding on to because it's also the second-best SPDR in September.

Materials Select Sector SPDR (XLB)

The Materials Select Sector SPDR (NYSE: XLB) averages an August loss of about half a percent, but things could be different for the largest materials ETF this year because it's coming off a July gain of almost 7%. On the other hand, XLB is also one of the two worst sector SPDR ETFs in September, indicating this is a risky seasonal period for the ETF.

Energy Select Sector SPDR (XLE)

The Energy Select Sector SPDR (NYSE: XLE) averages an August loss of almost 1%, according to CXO. If that historical form holds true, that would actually qualify as a decent month in 2020 for XLE. The fund lost 2.44% last month following an almost 4% loss in the last week of July. XLE is now down 40% this year.

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