Best Sector ETFs For July: Make Some Bank

Historically, June is unkind to stocks, but the Dow Jones Industrial Average just posted its best June showing since 1938.

July is here and with that comes the arrival of another month is usually rough on stocks. Over the past 20 years, the S&P 500 averages a July decline of 0.6%.

What To Know

While stocks usually don't set the world on fire in July, 2019 has the potential to be different. On the month's first trading day, market participants were treated to news from the G-20 summit that could set the tone for the rest of the month.

At the sector level, many groups actually perform well in the seventh month of the year, but the rub is that gains are usually modest. Seven of the nine original sector SPDR exchange traded funds notch July gains, according to CXO Advisory.

Why It's Important

Historically, the leader of the sector SPDR ETF pack in July is the Financial Select Sector SPDR XLF. The largest financial services ETF averages a July gain of about 1.3%, according to CXO data.

XLF is coming off a solid June in which surged 4.51%. On June 28, the financial ETF jumped 1.43% on volume that was nearly 30 million shares above the daily average after the Federal Reserve released the results of its Comprehensive Capital Analysis and Review, or CCAR, setting the stage for massive buyback and dividend increases among XLF components.

After surging 9.65% last month, the Materials Select Sector SPDR XLB could deliver more upside in July if it lives up to its historical reputation of being the second-best sector SPDR ETF this month behind XLF.

XLB averages July gains of just under 1%. The seventh month of the year is one of six in which XLB is either the best or second-best SPDR, according to CXO data.

What's Next

For investors thinking increased use of air conditioning or the summer driving season are bound to positively impact the energy and utilities sectors in July, that's a tough bet to make.

History suggests the Energy Select Sector SPDR XLE and the Utilities Select Sector SPDR XLU are the two sector SPDR ETFs that usually generate negative performances in the seventh month of the year.

Disclosure: The author owns shares of XLF.

Related Links:

Bond ETFs On Their Way To $2 Trillion

This Miners ETF Is Getting Crushed