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In Earnings Season, “Safer” Sector ETFs Are Winning

15 April 2011 at 2:13 pm by Gary Gordon     Bookmark and Share    Follow EtfExpert on Twitter

There has been a lot of talk about equity market resilience. There has been even more talk about the enormous amount of Stock ETF inflow… $5.5 billion last week alone!

Nevertheless, the largest gains are coming from the least volatile sectors. Healthcare ETFs have been noteworthy outperformers over¬†1¬†and 3 months.¬†What’s more,¬†share prices of peanut butter and toothpaste corporations (consumer¬†staples companies)¬†are also hitting new 52-week highs.

Perhaps ironically, earnings season was supposed to validate the reason to continue investing in the economically¬†sensitive cyclical sectors. Unfortunately, the markets banged up materials companies when Alcoa’s revenue came up short. Investors crucified “big tech”¬†when Google missed¬†profit expectations. And investors soured on financial stocks when J.P. Morgan Chase suggested that one shouldn’t expect additional dividend hikes anytime soon.

Validation for the drivers of the economy? Hardly. In fact, non-cyclicals claimed the 5-day prize in the initial week of earnings reports.

Sector ETFs In The First Week Of Earnings Season    
            Approx % 5 Trading Days
Consumer Staples Select SPDR (XLP)     2.0%
Health Care Select Sector SPDR (XLV)     1.8%
iShares Dow Jones Telecom (IYZ)     1.4%
Utilities Select Sector SPDR (XLU)     0.3%
Consumer Discretion Select SPDR (XLY)     0.5%
Technology Select Sector SPDR (XLK)     -0.7%
Industrials Select Sector SPDR (XLI)     -0.8%
Financials Select Sector SPDR (XLF)     -2.0%
Materials Select Sector SPDR (XLB)     -2.1%
Energy Select Sector SPDR (XLE)     -3.1%


In truth, it’s far too early to declare long-term victory for the less risky stock ETFs. The fact that mutual fund managers prefer to tread cautiously into healthcare and consumer staples with new-found inflows¬†may signal a¬†cautious money management environment; it hardly signifies a death¬†blow for the¬†bull.

If the broader non-cyclicals don’t give you enough of a boost, you might consider one or more sub-sector ETFs. The iShares DJ Healthcare Providers Fund¬†(IHF) has more than doubled the performance of Healthcare Select Sector SPDR (XLV) since the November elections. Meanwhile, Claymore Guggenheim Global Water (CGW) has outperformed Utilities Select Sector SPDR (XLU) over 5 days, 1 month, 3 month, 6 months and 1 year.

You can listen to the¬†ETF Expert Radio¬†Show¬†‚ÄúLIVE‚ÄĚ,¬†via podcast or on your iPod.¬†You can review more ETF Expert features here.

Disclosure Statement: ETF Expert¬†is a web log (‚ÄĚblog‚ÄĚ) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert disclosure details here.

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