In a previous edition of my “ETF Buyer’s Guide” series, I explored the differences between Vanguard and SPDR sector ETFs, highlighting that SPDR ETFs tend to be larger and more actively traded due to their focus on large-cap S&P 500 stocks and options availability. They’re also fairly cheap at 0.09%.
Interestingly, SPDR actually offers a mothership ETF—the SPDR SSGA U.S. Sector Rotation ETF XLSR+0.1% —that encapsulates this strategy by executing sector rotations, rebalanced monthly.
But for those interested in a more hands-on approach, managing sector exposure through individual ETFs is a viable option. These movements are particularly telling of how U.S. investors are positioning themselves relative to the ongoing macroeconomic shifts.
Here are the results as per the ETF Central screener. All data is as of May 15th, 2024.
The Energy Select Sector SPDR Fund XLE-1.79%
XLE (NYSE:) is known for its volatility and heavy trading volume, influenced significantly by commodity price fluctuations and geopolitical tensions. Over the past five days, XLE has experienced $182 million in outflows. It didn’t help that its top two holdings, ExxonMobil (NYSE:) and Chevron (NYSE:), also reported earnings.
This trend can likely be attributed to a recent de-escalation in tensions between Israel and Iran, prompting traders to lock in profits after the ETF’s notable year-to-date price increase of 11%. Still, if you remain in energy you’re getting “paid to wait” with a decent 2.93% 30-day SEC yield.
The Technology Select Sector SPDR Fund XLK+0.47%
XLK has seen significant activity following the conclusion of earnings season, with key constituents like Apple (NASDAQ:) and Microsoft (NASDAQ:) having reported their results in late April and early May.
Over the last five days, XLK has registered about $557 million in outflows. Despite this recent movement, the ETF has performed well year-to-date, with an 14% increase in price, largely buoyed by top holding Apple’s surge following the announcement of a $110 billion share buyback.
The Financial Select Sector SPDR Fund (NYSE:) XLF+0.14%
The Financial Select Sector SPDR Fund (XLF) has surged in popularity due to the Federal Reserve’s decision to maintain interest rates. Investors have poured $736 million into XLF over the past five days, likely benefiting in the short term from the current high interest rate environment. This is because higher interest rates typically translate to increased profitability for banks and other financial institutions held by the ETF. The financial sector is currently the third strongest sector year-to-date, trailing only Utilities (+14.53%) and Communication Services (+13.58%) with a return of +12.18%.
The Consumer Staples Select Sector SPDR Fund XLP-0.26%
XLP is a defensive equity ETF, characterized by its low five-year monthly beta of 0.59. It primarily holds mega-cap companies in consumer goods, food and beverage, and discount retail sectors, including household names like Procter & Gamble, Coca-Cola (NYSE:), and Costco (NASDAQ:).
Interestingly, XLP has seen significant inflows, with $579 million coming in over the last five days. This surge in inflows could be interpreted as a move towards risk aversion among investors, suggesting a shift in market sentiment towards safer investments.
The Utilities Select Sector SPDR Fund XLU-0.23%
XLU is another traditionally defensive sector ETF, noted for its relatively low beta of 0.73. Recently, XLU experienced substantial inflows, totaling $552 million. Part of this movement may stem from the same risk-off mindset that is influencing other defensive sectors, suggesting that investors are seeking stability.
Additionally, these inflows might be driven by expectations of falling interest rates in the near future. Utilities companies are typically high dividend payers and can become more attractive investments when interest rates decrease, as their stable dividend yields become more competitive relative to bonds.
This content was originally published by our partners at ETF Central.
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