Consumer Staples ETF: No. 6 Select Sector SPDR Over 2014's First 9 Months

| About: Consumer Staples (XLP)

Summary

The Consumer Staples exchange traded fund ranked sixth by returns among the nine Select Sector SPDRs during the first three quarters of 2014.

The ETF also ranked sixth by the same metric among the sector SPDRs over the first half of this year.

Seasonality analysis indicates the ETF's fourth quarter is its strongest of the year.

The Consumer Staples Select Sector SPDR ETF (NYSEARCA:XLP), in the first three quarters of this year, ranked No. 6 by returns among the Select Sector SPDRs dividing the S&P 500 into nine portions. On an adjusted closing daily share price basis, XLP climbed to $45.11 from $42.21, a hike of $2.90, or 6.87 percent. As a result, XLP performed worse than its parent proxy SPDR S&P 500 Trust ETF (NYSEARCA:SPY) by -1.29 percentage points and its sibling Health Care Select Sector SPDR ETF (NYSEARCA:XLV) by -9.65 points.

XLP ranked No. 4 by returns among the sector SPDRs in the third quarter, as it lagged the period's leading XLV by -3.71 percentage points and eclipsed SPY by 0.60 point. And XLP ranked No. 1 among the sector SPDRs in September, as it outdistanced SPY by 1.96 percentage points.

Comparisons of changes by percentages in all nine sector SPDRs and SPY during 2014's first nine months, over the third quarter and in September can be found in charts here.

XLP closed at $22.38 Tuesday: The aggregate returns of all nine sector SPDRs and SPY during this chilling month of October are reported at the bottom of this article.

Figure 1: XLP Monthly Change, 2014 Vs. 1999-2013 Mean

Source: This J.J.'s Risky Business chart is based on analyses of adjusted closing monthly share prices at Yahoo Finance.

XLP behaved much better in the first nine months of this year than it performed in the comparable periods of its initial 15 full years of existence, based on the means calculated by employing data associated with that historical time frame (Figure 1). The same data set shows the average year's weakest quarter was the first, with an absolutely small negative return, and its strongest quarter was the fourth, with a relatively large positive return.

Figure 2: XLP Monthly Change, 2014 Vs. 1999-2013 Median

Source: This J.J.'s Risky Business chart is based on analyses of adjusted closing monthly share prices at Yahoo Finance.

XLP behaved better in the first nine months of this year than it performed in the comparable periods of its initial 15 full years of existence, based on the medians calculated by using data associated with that historical time frame (Figure 2). The same data set shows the average year's weakest quarter was the first, with a small positive return, and its strongest quarter was the fourth, with a large positive return.

Figure 3: XLP No. 2 Among Select Sector SPDRs Month-To-Date

Source: This J.J.'s Risky Business chart is based on analyses of adjusted closing daily share prices at Yahoo Finance.

XLP ranked second by returns among the nine sector SPDRs between September 30 and October 14, as it contracted to $44.96 from $45.22, a reduction of -$0.15, or -0.33 percent (Figure 3). Lagging the period's leading Utilities Select Sector SPDR ETF (NYSEARCA:XLU) by -3.16 percentage points and outpacing SPY by 4.40 points, its return is still positive for the year to-date.

Neither XLP nor the Consumer Discretionary Select Sector SPDR ETF (NYSEARCA:XLY) appears positioned to behave well on an absolute basis at this point, given the challenges to American consumers described a while ago. In my interpretation of the relevant economic data, these consumers' net worth has been increasing and their total liabilities have been decreasing, while U.S. outstanding total consumer credit owned and securitized has been parabolically rising since its most recent significant nadir in July 2010. Sustainable? I do not believe so.

In terms of the equity market, however, XLP seems positioned to perform well on a relative basis at this time, meaning in comparison with SPY and most other sector SPDRs. The Federal Open Market Committee has no economic rationale to delay the announcements of the end of its current quantitative easing program as soon as October 29 and the beginning of its interest rate hikes as soon as April 29, as indicated in "SPY, U.S. Economic Index Bid Farewell To Record Highs In September."

And the bias divergence that has the U.S. Federal Reserve oriented toward tightening and the European Central Bank oriented toward loosening already has had major effects on multiple financial markets, ranging from currencies to commodities to the energy sector of the stock market. As a result, I anticipate XLP, XLV and XLU all will fare well in comparisons with their parent SPY and their sibling sector SPDRs, not only in the fourth quarter but also throughout the period of adjustment now under way.

Disclaimer: The opinions expressed herein by the author do not constitute an investment recommendation, and they are unsuitable for employment in the making of investment decisions. The opinions expressed herein address only certain aspects of potential investment in any securities and cannot substitute for comprehensive investment analysis. The opinions expressed herein are based on an incomplete set of information, illustrative in nature, and limited in scope. In addition, the opinions expressed herein reflect the author's best judgment as of the date of publication, and they are subject to change without notice.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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