Best Sector ETF Ideas For May: A Surprise

The May trading month starts Monday, and there will likely be the usual conjecture about "selling in May and going away," but it is also worth remembering May is not the worst month of the year for stocks. Not even close.

In fact, the S&P 500 usually rises in the fifth month of the year. Over the past 20 years, the benchmark U.S. equity gauge has posted an average return of 0.3 percent in the month of May, according to EquityClock.com.

Come What May

As is the case with the other 11 months of the year, some sectors and the corresponding exchange traded funds stand taller than others in the fifth month of the year. Among the best-performing sector SPDR ETFs in May, the leader on a historical basis is the Energy Select Sector SPDR (ETF) XLE.

XLE, the largest equity-based energy ETF by assets, has posted an average May gain of about 1.5 percent going back to 1999, the first full year of trading for the sector SPDR ETFs, according to CXO Advisory data. With XLE down 9.5 percent and ranking as one of the worst sector ETFs on a year-to-date basis, investors would love to see the giant energy fund notch a positive May performance.

Stepping Aside For Staples

On a historical basis, the second-best performer among the sector SPDR ETFs in May is the Consumer Staples Select Sector SPDR XLP. XLP, the largest consumer staples ETF by assets, averages a May gain of just over 1 percent, according to CXO data. XLP has already been a solid performer to this point in 2017 with a year-to-date gain of 7.3 percent.

None of the original sector SPDR ETFs average negative returns in May, but there are some that notch negligible gains. That is the case for the Consumer Discretionary Select Sector SPDR XLY. However, with Amazon.com, Inc. AMZN's XLY growing, continued upside for that stock could keep discretionary ETFs strong in May.

The Materials Select Sector SPDR XLB usually trades flat in May, according to CXO data, making it the worst-performing SPDR in the fifth month on a historical basis. XLB is the largest materials ETF and is up 8 percent year-to-date.