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Wall Street made a huge comeback in October, with the three main indices posting positive returns. The Dow Jones Industrial Average wrapped up its best month since 1976, surging about 14% in October, while the S&P 500 and the tech-heavy Nasdaq Composite Index gained about 8% and 3.9%, respectively (read: Dow Jones Logs Best Month Since 1976: ETFs to Bet On).
The solid trend is expected to continue this month. This is especially true as November is historically the best month of the year. In order to tap the bullishness, we have highlighted one ETF from each of the five sectors that could make a great play for investors. All these ETFs and stocks have a top Zacks Rank #1 (Strong Buy) or 2 (Buy). Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report) , iShares U.S. Industrials ETF (IYJ - Free Report) , SPDR S&P Regional Banking ETF (KRE - Free Report) , Vanguard Energy ETF (VDE - Free Report) and Materials Select Sector SPDR (XLB - Free Report) .
According to the Stock Trader's Almanac, the S&P 500 has gained an average of 1.7% in November since 1950. Additionally, November marks the start of the best six months for U.S. equities. Since 1945, the S&P 500 has climbed an average of 6.8% in the November through April period, according to Sam Stovall, chief investment strategist at CFRA.
Seasonality plays a vital role in the stock market surge during the six-month period (from November to April). Cyclical stocks from consumer discretionary, industrials, financials, energy and materials tend to benefit the most. This is especially true as investors look for more growth rather than being defensive when cyclical trading starts. This implies that investors should buy stocks during this bustling time in the market (see: all the Top Ranked ETFs).
Further, the bullish picture for November is backed by better-than-expected earnings and improving economic activity. Total earnings for the 170 S&P 500 members that have reported results so far are down 3.2% from the same period last year on 9.7% higher revenues, with 76.5% beating EPS estimates and 67.6% beating revenue estimates.
The earnings and revenue growth rate are modestly better than what was seen in the first half of the year from the same group of companies. With respect to positive surprises, the percentage of companies beating EPS and revenue estimates is below the 5-year average, but otherwise within the historical range.
Additionally, the U.S. economy posted its first period of positive growth in the third quarter. GDP grew 2.6% annually versus the estimate of 2.3%. A narrowing trade deficit as well as increases in consumer spending and government outlays boosted the growth.
Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report)
Consumer Discretionary Select Sector SPDR Fund offers exposure to the broad consumer discretionary space and tracks the Consumer Discretionary Select Sector Index. It holds 56 securities in its basket, with the key holdings in automobiles, hotels, restaurants and leisure, Internet & direct marketing retail, and specialty retail with a double-digit allocation each (read: Why Should You Buy Consumer ETFs Now?).
Consumer Discretionary Select Sector SPDR Fund is the largest and most-popular product in this space, with AUM of $14.6 billion and an average daily volume of around 6 million shares. It charges 0.10% in expense ratio and has a Zacks ETF Rank #2.
iShares U.S. Industrials ETF offers exposure to 177 U.S. companies that produce goods used in construction and manufacturing by tracking Russell 1000 Industrials 40 Act 15/22.5 Daily Capped Index. iShares U.S. Industrials ETF is tilted toward capital goods’ companies at 45.6%, while software services and transportation round off the next two spots with double-digit exposure each.
iShares U.S. Industrials ETF has an AUM of $1 billion and an average daily volume of around 60,000 shares. It charges 39 bps in annual fees and has a Zacks ETF Rank #2.
SPDR S&P Regional Banking ETF targets the banking corner of the financial sector and follows the S&P Regional Banks Select Industry Index. It holds 143 stocks in its basket (read: Guide to Interest Rates Hike and ETFs).
SPDR S&P Regional Banking ETF is one of the largest and the most-popular ETFs in the banking space, with AUM of $3.5 billion and an average daily volume of around 7.6 million shares. It charges 35 bps a year in fees and has a Zacks ETF Rank #1.
Vanguard Energy ETF provides exposure to a basket of 108 energy stocks by tracking the MSCI US Investable Market Energy 25/50 Index. It has key holdings in integrated oil & gas, oil & gas exploration & production and oil & gas storage & transportation.
Vanguard Energy ETF has amassed $8.7 billion in its asset base and sees a good volume of about 882,000 shares. It charges 10 bps in annual fees and has a Zacks ETF Rank #1.
Materials Select Sector SPDR is the most popular material ETF that follows the Materials Select Sector Index. It manages about $5.2 billion in its asset base and trades in volumes as heavy as around 6.4 million shares. Materials Select Sector SPDR holds about 28 securities in its basket and charges 10 bps in fees per year from its investors.
In terms of industrial exposure, chemicals dominates the portfolio with a 70.6% share, while metals & mining and containers & packaging round off the top three positions. The product has a Zacks ETF Rank #2.
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5 Sector ETFs That Could Flourish in November
Wall Street made a huge comeback in October, with the three main indices posting positive returns. The Dow Jones Industrial Average wrapped up its best month since 1976, surging about 14% in October, while the S&P 500 and the tech-heavy Nasdaq Composite Index gained about 8% and 3.9%, respectively (read: Dow Jones Logs Best Month Since 1976: ETFs to Bet On).
The solid trend is expected to continue this month. This is especially true as November is historically the best month of the year. In order to tap the bullishness, we have highlighted one ETF from each of the five sectors that could make a great play for investors. All these ETFs and stocks have a top Zacks Rank #1 (Strong Buy) or 2 (Buy). Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report) , iShares U.S. Industrials ETF (IYJ - Free Report) , SPDR S&P Regional Banking ETF (KRE - Free Report) , Vanguard Energy ETF (VDE - Free Report) and Materials Select Sector SPDR (XLB - Free Report) .
According to the Stock Trader's Almanac, the S&P 500 has gained an average of 1.7% in November since 1950. Additionally, November marks the start of the best six months for U.S. equities. Since 1945, the S&P 500 has climbed an average of 6.8% in the November through April period, according to Sam Stovall, chief investment strategist at CFRA.
Seasonality plays a vital role in the stock market surge during the six-month period (from November to April). Cyclical stocks from consumer discretionary, industrials, financials, energy and materials tend to benefit the most. This is especially true as investors look for more growth rather than being defensive when cyclical trading starts. This implies that investors should buy stocks during this bustling time in the market (see: all the Top Ranked ETFs).
Further, the bullish picture for November is backed by better-than-expected earnings and improving economic activity. Total earnings for the 170 S&P 500 members that have reported results so far are down 3.2% from the same period last year on 9.7% higher revenues, with 76.5% beating EPS estimates and 67.6% beating revenue estimates.
The earnings and revenue growth rate are modestly better than what was seen in the first half of the year from the same group of companies. With respect to positive surprises, the percentage of companies beating EPS and revenue estimates is below the 5-year average, but otherwise within the historical range.
Additionally, the U.S. economy posted its first period of positive growth in the third quarter. GDP grew 2.6% annually versus the estimate of 2.3%. A narrowing trade deficit as well as increases in consumer spending and government outlays boosted the growth.
Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report)
Consumer Discretionary Select Sector SPDR Fund offers exposure to the broad consumer discretionary space and tracks the Consumer Discretionary Select Sector Index. It holds 56 securities in its basket, with the key holdings in automobiles, hotels, restaurants and leisure, Internet & direct marketing retail, and specialty retail with a double-digit allocation each (read: Why Should You Buy Consumer ETFs Now?).
Consumer Discretionary Select Sector SPDR Fund is the largest and most-popular product in this space, with AUM of $14.6 billion and an average daily volume of around 6 million shares. It charges 0.10% in expense ratio and has a Zacks ETF Rank #2.
iShares U.S. Industrials ETF (IYJ - Free Report)
iShares U.S. Industrials ETF offers exposure to 177 U.S. companies that produce goods used in construction and manufacturing by tracking Russell 1000 Industrials 40 Act 15/22.5 Daily Capped Index. iShares U.S. Industrials ETF is tilted toward capital goods’ companies at 45.6%, while software services and transportation round off the next two spots with double-digit exposure each.
iShares U.S. Industrials ETF has an AUM of $1 billion and an average daily volume of around 60,000 shares. It charges 39 bps in annual fees and has a Zacks ETF Rank #2.
SPDR S&P Regional Banking ETF (KRE - Free Report)
SPDR S&P Regional Banking ETF targets the banking corner of the financial sector and follows the S&P Regional Banks Select Industry Index. It holds 143 stocks in its basket (read: Guide to Interest Rates Hike and ETFs).
SPDR S&P Regional Banking ETF is one of the largest and the most-popular ETFs in the banking space, with AUM of $3.5 billion and an average daily volume of around 7.6 million shares. It charges 35 bps a year in fees and has a Zacks ETF Rank #1.
Vanguard Energy ETF (VDE - Free Report)
Vanguard Energy ETF provides exposure to a basket of 108 energy stocks by tracking the MSCI US Investable Market Energy 25/50 Index. It has key holdings in integrated oil & gas, oil & gas exploration & production and oil & gas storage & transportation.
Vanguard Energy ETF has amassed $8.7 billion in its asset base and sees a good volume of about 882,000 shares. It charges 10 bps in annual fees and has a Zacks ETF Rank #1.
Materials Select Sector SPDR (XLB - Free Report)
Materials Select Sector SPDR is the most popular material ETF that follows the Materials Select Sector Index. It manages about $5.2 billion in its asset base and trades in volumes as heavy as around 6.4 million shares. Materials Select Sector SPDR holds about 28 securities in its basket and charges 10 bps in fees per year from its investors.
In terms of industrial exposure, chemicals dominates the portfolio with a 70.6% share, while metals & mining and containers & packaging round off the top three positions. The product has a Zacks ETF Rank #2.