The cliche "sell in May and go away" was true this last May, much to the disappointment of sanguine investors who were hoping to see stocks give at least some sort of return.
But this doesn't mean all stocks or even all index funds fared the same. During time of economic uncertainty, dividend stocks are notorious for keeping their collective head above water, at least compared to broader index funds -- but they still usually get hit in the teeth when the market does too horribly, like (SDY) did during May when it lost about 5%.
But (XLU) and other utilities index funds didn't get hurt -- they actually stayed basically flat or even made money during May by about 0.6%. Not exactly the stuff of legend, but for investors who are looking to shift their portfolio to survive turbulent times, that's something worth taking.
Last year, during the stock drops in late July, XLU didn't remain unscathed, but it did bounce back must faster than other indexes whether we're talking a broad-based index like (DIA) or the above index ETF like SDY.
Remember, this is just looking at the prices for the ETFs, and doesn't account for dividend payouts, which would likely make XLU fare even better as its healthy (current) dividend yield of 3.77% is nothing to sneeze at.
The reasoning for this "survival" mode is pretty simple: people aren't remotely about to stop using electricity and other utilities, meaning they're a great place to put money if you're waiting for the economic hurricane to blow over. A boring portfolio of long-term corporate bonds (like (VCLT)), some gold (GLD), and utility stocks would have made a killing since the inception of the ETFs.
For example, XLU has returned 21.7% since inception, while the SPY has returned just 11.48%. This still doesn't include dividends, and if it does, XLU absolutely blows the competition out of the water again with healthy dividend payments over 50 times during that same time period, each time outperforming the SPY and DIA.
I'm picking individual stocks that are undervalued right now, but at first fear of more stock drops, I'll be looking into putting something into XLU to hopefully outperform the market with this boring, secure income source. It doesn't get much better than that.
Additional disclosure: I have money in physical gold and will be adding to my position regularly.