Conservative Sector ETF Ideas For September

September is here and that is great news for fans of American football, but financial market data indicate equity bulls would do well to curb what enthusiasm they have left after a trying August.

For believers in seasonal trends, it must be noted that over the last 20 Septembers, the S&P has posted an average performance of zero. The benchmark U.S. equity index is traditionally flat in September over that period, according to Equity Clock data.

That does not mean sector-level opportunities cease to exist in the ninth month. Rather, the opposite is true, but if history repeats in September 2015, investors will want to take a conservative approach to sector exchange traded funds this month.

Utilities

The Utilities Select Sector SPDR XLU is usually the top performer among the nine sector SPDRs in the month of September, averaging a modest gain in the ninth month of the year, according to CXO Advisory.

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XLU is in the midst of what is supposed to be a seasonally strong period for the largest utilities ETF as the fund is usually the second-best of the nine SPDRs in August. Indeed, XLU lived up to that track record, but underscoring just how poorly stocks performed last month, XLU lost 4 percent. Only the Energy Select Sector SPDR XLE was better among the nine SPDRs.

Consumer Staples

According to CXO data, the Consumer Staples Select Sector SPDR XLP is usually the second-best of the nine SPDRs this month, though like the S&P 500, is usually about flat this month, reminding investors that sometimes less bad is good.

However, before backing up the bus on XLP, investors should note that the largest staples ETF was usually the best of the sector SPDRs in August, but that historical data did not mean much as XLP tumbled 6.1 percent last month.

Materials & Tech

In terms of the worst of the nine SPDRs in September, that dubious honor goes to the Materials Select Sector SPDR XLB followed by the Technology Select Sector SPDR XLK. This is where things get interesting and those things are a reminder that seasonal trading often requires the user to be nimble.

Historical data, courtesy of CXO, indicate XLU is usually the best SPDR this month, but that is before it turns into October's worst. Conversely, XLK is historically the second-worst SPDR in September before it becomes the best of the nine in October.

Image credit: John McStravick, Flickr