The Utilities Sector Gets A Lot More Volatile In The Summer

According to data from CXO Advisory, the Utility sector, one of the most historically defensive stock market sectors, becomes a lot more volatile in the summer months. Since the SPDR sector ETFs launched back in 1999, the Utilities SPDR (ETF) XLU has been the best-performing sector ETF in the months of June, August and September and the second worst-performing ETF of July.

June is a historically weak month for the S&P 500, and the XLU is the only sector ETF that has averaged an overall gain in the month since 1999.

Surprisingly, the XLU transitions to the second-worst sector ETF in July.

Once August rolls around, the XLU really starts to shine and is the top-performing sector ETF once again in both August and September.

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But before traders get too excited about going long on Utilities through the end of September, it’s important to remember that these late-summer months are typically weak periods for the overall market.

Despite being the best-performing sector in both August and September, the XLU still only averages a -1.6 percent return during these two months over the past five years.

So far this year the XLU has been the best-performing sector ETF, up 12.6 percent on the year. The Health Care SPDR (ETF) XLV has been 2016’s worst-performing sector ETF so far.

Disclosure: the author holds no position in the stocks mentioned.