September is here and that may not be good news for those long
stocks. August was the worst month for U.S. equities since May
2012. It was also the worst month for ETF outflows since January
Bring on September, the month that is usually the worst of the
year for stocks. That is right. For the S&P 500, Dow Jones
Industrial Average and Nasdaq Composite, September is the
12th-best month on the calendar in terms of performance.
Three ETFs To Own In August
While August is no picnic and September has a tendency to be
even worse, some sectors prove more durable than others during
these months. Just as February marks the start of a strong
for energy stocks
, the staples and utilities sectors usually lead in August and
Things could be different this year because of rising interest
rates. For the 14 previous years for which data is available on
the sector SPDR ETFs, the Consumer Staples Select Sector SPDR
) is the top performer of the nine SPDRs in August followed by
the Utilities Select Sector SPDR (NYSE:
). In September, the two ETFs switch with XLU ranking as the best
of the nine and XLP in second place.
Last month, XLP fell 5.3 percent while XLU tumbled 5.8
percent. Well-documented is the inverse correlation of
some popular dividend sectors
, including utilities, to rising interest rates. That scenario is
playing out again Tuesday as yields on 10-year Treasuries are
soaring by over five percent, while XLU is off nearly one
XLU has a dividend yield of nearly four percent while the
rival Vanguard Utilities ETF (NYSE:
) yields 3.6 percent, alluring numbers for income investors, but
ones that did not stop S&P Capital IQ from merely rating the
Marketweight last month
As for staples, the sector is
is middling at best during rising rates
. XLP's correlation to the iShares Barclays 20+ Year Treasury
Bond ETF (NYSE:
), although negative, is the second-highest among the nine sector
SPDRs behind XLU.
On days that TLT has traded higher over the past decade, only
XLU and the Health Care Select Sector SPDR (NYSE:
) have few up days than XLP among the nine SPDRs,
according to ETF Replay data
. As for down days when TLT rises, XLP ranks in the middle as
four other SPDRs fall more frequently when TLT rises.
Bottom line: Staples and utilities may seem like shelter from
the September storm plays, but this year may not be the year to
put that theory to work because of rising rates. For those
wanting to know which SPDR is worst in September, that dubious
honor goes to the Materials Select Sector SPDR (NYSE:
For more on ETFs, click .
Disclosure: Author does not own any of the securities
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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