March Market Trends Signal 3 Sectors To Watch As Seasonal Strength Builds

The market just wrapped up a lackluster February, with the S&P 500 Index slipping 1.4% amid economic uncertainty, sticky inflation, and signs of retail buyer fatigue.

But according to Adam Turnquist, Chief Technical Strategist at LPL Financial, seasonal trends suggest that March could bring a shift in momentum, making it a key period for portfolio adjustments.

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March's Historical Strength Warrants Tactical Adjustments

Since 1950, the S&P 500 has posted an average March gain of 1.1%, finishing positive 65% of the time. Historically, momentum tends to carry into April, signaling a potential rebound. This seasonality could present a chance for investors to reassess sector allocations and position themselves ahead of a historically favorable period.

Beyond seasonality, macroeconomic headwinds remain in focus. Inflation data continues to drive market sentiment, and Federal Reserve policy expectations could further dictate investor positioning.

However, Turnquist notes that past trends suggest investors who rotate into outperforming sectors early in the month could benefit from the seasonal upswing.

Where To Position: Sector Standouts And Weak Spots

Turnquist highlights three sectors with historical March outperformance: real estate, utilities, and consumer discretionary. Since 2002, real estate has averaged a 2.0% gain in March, while utilities and consumer discretionary stocks have delivered 1.7% average gains since 1990.

To capitalize on these seasonal trends, investors may look to the Real Estate Select Sector SPDR Fund XLRE and the Utilities Select Sector SPDR Fund XLU for defensive positioning, while the Consumer Discretionary Select Sector SPDR Fund XLY could benefit from renewed market momentum. These exchange-traded funds (ETFs) offer broad exposure to sectors that have historically outperformed during this period.

Conversely, healthcare has underperformed in March, with an average return of just 0.5%. Investors looking to rebalance may consider reducing exposure to healthcare stocks or reallocating funds toward historically stronger sectors.

A Prime Moment For Portfolio Adjustments

With February's pullback offering a reset, March presents a prime opportunity for investors to optimize portfolios ahead of what has historically been a seasonally strong period.

While macroeconomic risks persist, historical patterns suggest that a tactical shift into leading sectors could offer a strategic advantage.

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