Some sector ETFs are better to own than others during U.S. Presidential Election years.
For the most part, sector ETFs follow the same pattern as in average years. The exceptions are Technology and Materials, sectors that significantly underperform after the month of May. On average, during U.S. Presidential years the Technology sector lost 4.0 per cent and the Materials sector fell 6.0 per cent for the year.
That's considerably worse than the average annual performance when all years are factored in; in this case, the Materials sector averages a gain of 7.0 per cent and the Technology sector averages a gain of 12.0 per cent.
Price trends for most sectors were consistent during the first five months of the year. All sectors except Technology recorded minor losses from the beginning of January to the first week in March. Thereafter, all sectors recorded gains until the end of May.
Best performing sectors during Presidential election years were Consumer Staples, Energy and Financial Services. The Financial Services sector was notably stronger late in the year following the Presidential election on the first Tuesday in November. On average, Consumer Staples gained 6.0 per cent, Energy improved 6.2 per cent and Financial Services added 9.0 per cent during the year.
The easiest way to invest in U.S. sectors is through select sector SPDRs. All are exchange traded funds that trade actively on U.S. exchanges. Following is a list of available select sector SPDRs:
Technology
Utilities
Financials
Health Care
Consumer Staples
Consumer Discretionary
Industrials
Materials
Energy
Following are seasonality charts showing relative seasonal trends for the Consumer Staples, Energy and Financial Services sectors during a U.S Presidential year based on data that first became available from Standard & Poor's in 1990.
Don Vialoux is the author of free daily reports on equity markets, sectors, commodities and Exchange Traded Funds. He is also a research analyst for JovInvestment Management Inc. All of the views expressed herein are his personal views although they may be reflected in positions or transactions in the various client portfolios managed by JovInvestment. JovInvestment is the investment manager for the Horizons family of ETFs. Daily reports are available at http://www.timingthemarket.ca/
Don Vialoux