ETFs

These ETF Sectors Won Earnings Season

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Investing is not a competition, or at least it shouldn’t be. However, earnings season has become much more volatile and unpredictable when it comes to the relationship between companies’ actual quarterly announcements and their stock price reaction.

So, as part of an advisor’s or investor’s ongoing market monitoring, it’s worth taking a look each quarter at how the 11 S&P 500 sectors are performing relative to each other.

While earnings announcements occur almost every trading day, when mega-bank JP Morgan releases its results, it is widely believed that the competition on the earnings track begins.

This last happened on April 12, so I looked at the returns of each sector “spider” ETF from that date through Tuesday’s close. Utilities came out on top, up 8.3%, as indicated by SPDR Select Utility Sector ETF (XLU).

These four words strung together (“utilities were the winners”) might be new to some investors, because it’s been a long time since this small, high-yielding sector of the U.S. stock market dominated an earnings season during which the stock market did not collapse.

THE SPDR S&P 500 Trust (SPY) gained 1.2% during this period, and the Invesco S&P 500 Equal Weight ETF (RSP) grew 1.6%, so it wasn’t a bad earnings period from that perspective.

Low energy profits for this ETF

The energy sector, represented by SPDR Select Energy Sector ETF (XLE), lagged behind, down 3%. This reflects at least a slightly positive reception for corporate earnings this quarter. In total, nine of the eleven sectors showed positive results, although many of them have a return slightly above zero.

This naturally masks the massive range of individual stock reactions to earnings, whether it’s a 10% to 20% rise from one night’s close to the next morning’s open, or a fluctuation in identical percentage preceded by a minus sign. That’s what earnings season has become: five-week periods, during which advisors and investors who own individual stocks must put on hard hats at 4 p.m. ET, Monday through Thursday.

But that’s why ETFs are so valuable in any investor’s toolset. They provide diversification, but we can also identify specific securities each day (unlike mutual funds), so we know what we own and assess where the opportunities and risks lie.

Consumer staples gained 4.6%, this time finishing second in the sector derby. This performance of Consumer Staples Sector ETF (XLP)combined with XLU’s strong gains, are reminiscent of some dark market periods, during which these defense sectors outperformed.

However, it’s only been a month, and besides, we’re talking about earnings season. Look, analyze, but don’t insist too much.

The story continues

There’s another one coming in July!

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