Best Sector ETFs For June: Powering Up

For all the talk about selling in May and going away, May 2017 proved to be a good month for U.S. stocks as the S&P 500 gained about 1.2 percent. June is here, which could bring some retrenchment for stocks if the sixth month of the year holds true to historical form.

Over the past 20 years, the S&P 500 averaged a June loss of one-third of a percent and rose in just over half of those Junes, according to EquityClock.com.

Hot Hot Hot

As is the case with other months of the year, June brings sector-level opportunities, which can easily be played with some well-known exchange-traded funds. Some of June's best-performing sector ETFs can be considered “conservative” or “slow-moving," given general market lethargy and risk-off sentiment in the summer months.

For example, on a historical basis, the best-performing member of the sector SPDR suite of ETFs in June is the Utilities Select Sector SPDR XLU. Underscoring the point that U.S. equities are prone to tepid gains or losses in June, XLU's average June gain since 1999, the first full year of trading for the sector SPDR ETFs, is just half a percent, according to CXO Advisory data.

XLU, the largest utilities ETF by assets, is up more than 10 percent year to date. June and September are the two months in which XLU is the best sector SPDR, according to CXO.

Using recent performance as a gauge, it may surprise some investors to learn that the Energy Select Sector SPDR XLE, the worst-performing sector SPDR ETF this year, is June's second-best performer. On a historical basis, XLE is usually positive in June, though not by much, according to CXO data.

Investors should always remember past performance is not a guarantee of future returns. XLE proved as much in May. Historically, XLE is the best-performing SPDR in May, but the energy ETF slipped more than 3 percent last month, bringing its year-to-date loss to close to 13 percent.

Revisiting The 9

Of the nine original sector SPDR ETFs, only XLU and XLE historically generate positive June performances, meaning there are plenty of potential duds to be aware of this month. The Industrial Select Sector SPDR XLI is one to watch. XLI, the largest industrial ETF, usually posts a June loss of more than 1 percent, according to CXO data.

A worse June offender is the already lagging Financial Select Sector SPDR XLF. XLF averages a June loss of almost 2 percent, one of the worst monthly showings in any month for any of the original SPDRs, according to CXO.

The good news for aggressive traders is XLF's June woes turn into July redemption as the ETF is usually the best SPDR in July.

Disclosure: Todd Shriber owns shares of XLF.