With no sectors showing an obvious dominance in the month of May, I thought it would be more helpful to provide statistical data for my readers, that you may or may not be able to derive some ideas. If you subscribe to the mean reversion theory, which I do, then you may want to take a look at Natural Resources and Energy specific ETFs. The average natural resources mutual fund has finished in positive territoty nineteen times over the past twenty-five years in the month of may. Of the eleven sectors analyzed, natural resource funds have provided one of the highest returns on investment with a compounded average annual return of 25.45%. Also note, the higher return has come with a higher level of volatility.
Energy ETFs are also catching my eye going into May. There are few reasons why I would consider a long position in this area. The first being that the sector, as a whole, has provided the most bang for your buck in the month of May over the last twenty-five years. The average energy mutual fund has provided a compounded average annual return of 34.54%. Again, with the higher return comes a higher standard deviation when compared to the rest of the sectors and the S&P 500. That is why I like energy stocks going into May. Not only has the average energy mutual fund finished in negative territory the last two years in the month of May, but it is also coming off a month, which at this point has not been fruitful. This April's performance has been a complete divergence from energy's historically strong performance in the month. With energy prices still near all-time highs, and strong earnings reports coming in from the likes of ExxonMobil (XOM), I expect a positive move back towards the mean.
I hope my readers are able to find something useful in the data I have shared. Based on my analysis of the historical data, and current market conditions, I will be establishing a long poistion in the SPDR S&P Global Natural Resources ETF (GNR) and holding my long position in the Energy Select Sector SPDR (XLE). There are still a few trading tradings left in the month and thus far my bet on the energy sector has not paid off as the XLE sits slightly below where it began the month, and has performed much more in line with the entire market in April.
Thank you and good luck everyone!
Jon R. Orcutt, founder
of Allocation For Life, is an asset allocation strategist and author of “Master
the Markets with Mutual Funds: A Common Sense Guide To Investing Success”
www.allocationforlife.com
| MAY | Cons Disc | Health Care | Energy | Financials | Cons Staples | Technology |
| 1987 | 1.52% | 0.89% | 5.67% | -1.02% | -0.63% | 0.41% |
| 1988 | -2.39% | -0.80% | -3.39% | 0.63% | 0.75% | -3.88% |
| 1989 | 5.53% | 3.15% | 1.93% | 4.20% | 6.17% | 6.94% |
| 1990 | 10.52% | 12.23% | 9.42% | 6.71% | 8.71% | 12.78% |
| 1991 | 5.96% | 4.40% | 1.46% | 5.22% | 3.66% | 3.13% |
| 1992 | 0.57% | 3.16% | 5.67% | 3.13% | 0.89% | 1.16% |
| 1993 | 6.49% | 5.07% | 4.07% | -1.03% | 3.15% | 8.62% |
| 1994 | -2.27% | 0.56% | 1.92% | 4.25% | -0.73% | -2.02% |
| 1995 | 1.72% | 1.16% | 2.33% | 5.13% | 3.59% | 3.65% |
| 1996 | 3.82% | 1.77% | 1.62% | 1.99% | 3.69% | 3.35% |
| 1997 | 7.15% | 10.34% | 10.42% | 5.46% | 3.40% | 12.43% |
| 1998 | 0.27% | -3.52% | -6.36% | -2.40% | 0.69% | -6.72% |
| 1999 | -2.75% | -0.12% | -2.59% | -3.49% | -1.63% | -0.98% |
| 2000 | -2.44% | 1.49% | 11.52% | 5.50% | 3.89% | -11.58% |
| 2001 | 3.11% | 4.22% | 0.55% | 4.03% | 2.57% | -4.12% |
| 2002 | -0.45% | -3.67% | -2.72% | 0.03% | 0.50% | -5.80% |
| 2003 | 5.87% | 8.95% | 12.68% | 6.18% | 6.44% | 12.27% |
| 2004 | -0.16% | -0.70% | -1.09% | 1.95% | -1.08% | 5.62% |
| 2005 | 5.71% | 2.70% | 3.98% | 2.62% | 3.21% | 9.25% |
| 2006 | -3.39% | -3.25% | -3.87% | -3.82% | -0.31% | -8.17% |
| 2007 | 3.29% | 1.30% | 7.80% | 2.45% | 1.53% | 4.29% |
| 2008 | 1.18% | 2.52% | 7.86% | -2.79% | 1.10% | 5.85% |
| 2009 | 0.72% | 5.67% | 17.26% | 10.96% | 6.41% | 4.45% |
| 2010 | -6.75% | -7.79% | -12.69% | -9.72% | -6.91% | -7.01% |
| 2011 | 0.17% | 2.14% | -4.30% | -2.85% | 1.30% | -1.56% |
| Compounded Avg Ann Ret | 21.17% | 26.01% | 34.54% | 21.10% | 25.75% | 18.80% |
| # of Times Finished Up | 17 | 18 | 17 | 17 | 19 | 15 |
| Mean Return | 1.72% | 2.07% | 3.48% | 1.73% | 2.01% | 1.69% |
| Standard Deviation | 4.02 | 4.42 | 6.40 | 4.42 | 3.22 | 6.81 |
| MAY | Telecom | Natural Res | Real Estate | Utilities | Industrials | S&P 500 |
| 1987 | 2.42% | 1.05% | -1.36% | -1.27% | 1.51% | 0.87% |
| 1988 | 1.95% | -1.81% | -1.08% | 3.62% | -1.61% | 0.86% |
| 1989 | 5.91% | 0.46% | 1.31% | 4.42% | 3.50% | 4.05% |
| 1990 | 8.43% | 7.60% | 0.88% | 4.58% | 6.82% | 9.75% |
| 1991 | 0.75% | 3.07% | 1.07% | 0.20% | 5.72% | 4.31% |
| 1992 | -0.65% | 3.91% | 3.21% | 1.95% | -0.22% | 0.49% |
| 1993 | 3.30% | 3.56% | -0.69% | 0.28% | 4.39% | 2.68% |
| 1994 | -0.22% | 1.69% | 1.28% | -2.50% | -1.88% | 1.64% |
| 1995 | 2.49% | 1.65% | 4.00% | 3.74% | 1.67% | 4.00% |
| 1996 | 2.85% | 1.18% | 2.55% | 0.74% | 1.39% | 2.58% |
| 1997 | 9.91% | 8.02% | 2.90% | 4.81% | 7.88% | 6.09% |
| 1998 | -4.39% | -7.48% | -1.15% | -1.36% | -2.93% | -1.72% |
| 1999 | -0.53% | -3.90% | 2.28% | 2.51% | -1.42% | -2.36% |
| 2000 | -8.97% | 7.99% | 1.19% | -1.06% | -3.64% | -2.05% |
| 2001 | -4.96% | 0.86% | 2.02% | -1.84% | 3.64% | 0.67% |
| 2002 | -1.52% | 0.27% | 1.42% | -3.46% | -0.67% | -0.74% |
| 2003 | 9.52% | 10.56% | 5.54% | 0.30% | 4.22% | 5.27% |
| 2004 | 0.73% | 0.66% | 6.34% | 1.72% | 2.08% | 1.37% |
| 2005 | 5.42% | 2.48% | 3.15% | 0.73% | 4.86% | 3.18% |
| 2006 | -6.81% | -3.39% | -2.81% | -0.16% | -2.91% | -2.88% |
| 2007 | 7.14% | 5.97% | 0.59% | 3.41% | 5.77% | 3.49% |
| 2008 | 5.24% | 6.98% | 0.08% | 3.67% | 2.30% | 1.30% |
| 2009 | 7.87% | 15.98% | 3.06% | 6.13% | 4.25% | 5.59% |
| 2010 | -5.47% | -10.68% | -5.25% | -6.69% | -8.40% | -7.99% |
| 2011 | -0.17% | -4.16% | 1.36% | 0.30% | -2.56% | -1.13% |
| Compounded Avg Ann Ret | 18.92% | 25.45% | 15.69% | 11.75% | 16.12% | 19.31% |
| # of Times Finished Up | 15 | 19 | 19 | 17 | 15 | 18 |
| Mean Return | 1.61% | 2.10% | 1.28% | 0.99% | 1.35% | 1.57% |
| Standard Deviation | 5.16 | 5.76 | 2.51 | 2.99 | 3.90 | 3.60 |
