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A Look Back At S&P 500 Sector ETFs in 2019

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Sanghamitra Saha
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We have now reached the last leg of 2019 and it’s been a rewarding year so far for Wall Street. The key U.S. index S&P 500 has added as much as 26.3% this year (as of Dec 13, 2019). Key events of this year were Fed rate cuts and a phase-one U.S.-China trade deal after almost two-years of wrangling.

No wonder, investors would be interested in knowing how each sectors of the S&P 500 has performed this year. Investors should note that as of September 2018, the S&P 500 was divided into 11 sectors with their respective weightings by market capitalization. Below we highlight the performance of those key S&P 500 sectors in 2019.

Technology: Weight 20.8% -- Technology Select Sector SPDR Fund XLK – Up 44.3% YTD

The technology corner of the broad U.S. stock market has been a clear winner this year despite occasional trade tensions. The emergence of cutting-edge technology is acting as key catalysts. This went in favor of technology ETFs like XLK. The fund XLK is heavy on Apple (up 74.2% YTD) and Microsoft (up 52.8%) with each carrying more than 19% of the basket. This explains stellar gains in XLK in 2019 (read: After a Sweet November, Apple ETFs Are Set for a Warm December).

Health Care: Weight 14.9% -- Health Care Select Sector SPDR Fund XLV – Up 18.4%

The sector maintained a low-profile in the first three quarters of the year only to take a spurt from the fourth quarter. Decent earnings, solid drug data, healthy flow of FDA approvals, a solid merger & acquisition environment have been driving the sector in recent months (read: Deal or No Deal: Healthcare ETFs to Make a Sweep in 2020).

Financials: Weight 13.7% -- Financial Select Sector SPDR Fund XLF – Up 27.9%

This sector has also remained range-bound in the first three quarters of the year and staged an uptrend from October on a steepening yield curve, compelling valuation and favorable earnings. Solid dividend payout is another positive in the space (read: Why Bank ETFs May Soar in 2020).

Consumer Discretionary: Weight 10.2% -- Consumer Discretionary Select Sector SPDR Fund XLY – Up 23.5%

This sector has recorded a steady uptrend throughout the year. Low rates, a 50-year low unemployment rate, soaring stocks and cheap energy prices have resulted in solid gains for discretionary stocks. Per a BMO strategist, “Consumer Discretionary, far and away, has the highest estimated long-term EPS growth expectations among S&P 500 sectors (read: 2 Sectors & Their ETFs Are Hot Picks for 2020).”

Communication Services: Weight 9.9% -- Communication Services Select Sector SPDR Fund XLC – Up 25.7%

This fund invests about 44% of its weight in Facebook (up 45% YTD) and Alphabet (27.9%).  Other stocks like Disney, AT&T, Activision Blizzard have also delivered solid returns and drove the fund in 2019. However, Netflix’s subdued gains kept the fund from soaring further (read: ETFs in Focus on Dull 2020 Subscriber Outlook for Netflix).

Industrials: Weight 9.7% -- Industrial Select Sector SPDR Fund XLI – UP 26.2%

The Fed cut rates thrice this year since July, which led to low rates for the most part of the year. This along with U.S.-China trade deal hopes favored industrial ETF XLI (read: Fed to Not Hike Rates in 2020: ETF Areas to Shine).

Consumer Staples: Weight 6.7% -- Consumer Staples Select Sector SPDR Fund XLP – Up 24.4

Being defensive in nature, the consumer staples sector benefited from occasional trade tensions this year. This sector also performs well in a low-rate environment. Decent earnings picture and rising food inflation have given a boost to the staples companies (read: 5 ETFs & Stocks to Profit From One-Year High U.S. Inflation).

Materials: Weight 2.5%-- Materials Select Sector SPDR Fund XLB – Up 19%

Though cost pressure has been a drag on the space, broader risk-on trade sentiments and U.S.-China trade negotiations have lent a hand to the materials sector.

Real Estate: Weight 2.7% -- The Real Estate Select Sector SPDR Fund XLRE – Up 24.1%

Low rates backed by Fed rate cuts, solid rental growth and a steadily-growing U.S. economy have favored the fund. The fund’s benchmark-beating yield is another positive.

Utilities: Weight 2.8% -- Utilities Select Sector SPDR Fund XLU – Up 21.8%

This is yet another sector which thrives on low rates as it is capital-intensive in nature. Solid dividend yields of the sector is a tailwind. Plus, the U.S. utilities sector is thriving on several developments. One of the most significant developments in the space is the “awareness of energy efficiency programs, and implementation of the same in residential and commercial buildings and industrial plants.” 

Energy: Weight 6.0% -- Energy Select Sector SPDR Fund XLE – Up 3.1%

Energy stocks are clear underperformers despite about 25% jump in U.S. crude prices. Acute earnings pressure wreaked havoc on the space.

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Health Care Select Sector SPDR Fund (XLV): ETF Research Reports
 
Industrial Select Sector SPDR Fund (XLI): ETF Research Reports
 
Consumer Discretionary Select Sector SPDR Fund (XLY): ETF Research Reports
 
Energy Select Sector SPDR Fund (XLE): ETF Research Reports
 
Utilities Select Sector SPDR Fund (XLU): ETF Research Reports
 
Real Estate Select Sector SPDR Fund (XLRE): ETF Research Reports
 
Financial Select Sector SPDR Fund (XLF): ETF Research Reports
 
Materials Select Sector SPDR Fund (XLB): ETF Research Reports
 
Consumer Staples Select Sector SPDR Fund (XLP): ETF Research Reports
 
Technology Select Sector SPDR Fund (XLK): ETF Research Reports
 
Communication Services Select Sector SPDR Fund (XLC): ETF Research Reports
 
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