A time for caution in consumer and materials sectors

Jay Kaeppel

2024-09-09

Key points

September is known historically as the weakest month of the year for stocks (though results can and do vary significantly from year to year)
September 2024 is off to a particularly rough start
If history proves an accurate guide, investors may do well to avoid large allocations to the consumer staples, consumer discretionary and materials sectors

Sector #1: Consumer Staples

The chart below displays the annual seasonal trend for the Consumer Staples Select Sector SPDR ETF (ticker XLP), which tracks the S&P 500 Consumer Staples Index.

Note that an unfavorable period extends from Trading Day of Year (TDY) # 175 through TDY #188. For 2024, that period extends from the close on 2024-09-11 through 2024-09-30.

We will use the S&P 500 Consumer Staples Index starting in 1953 for testing purposes. The chart below displays the hypothetical growth of $1 achieved by holding a long position in the Consumer Staples Index only during the TDY #175 to #188 period since 1953.

The table below summarizes the Consumer Staples Index performance during this period.

Sector #2: Consumer Discretionary

The chart below displays the annual seasonal trend for the Consumer Discretionary Select Sector SPDR ETF (ticker XLY), which tracks the S&P 500 Consumer Discretionary Index.

Note that an unfavorable period extends from Trading Day of Year (TDY) # 177 through TDY #188. For 2024, that period extends from the close on 2024-09-13 through 2024-09-30.

We will use the S&P 500 Consumer Discretionary Index starting in 1953 for testing purposes. The chart below displays the hypothetical growth of $1 achieved by holding a long position in the Consumer Discretionary Index only during the TDY #177 to #188 period since 1953.

The table below summarizes Consumer Discretionary Index performance during this period.

Sector #3: Materials

The chart below displays the annual seasonal trend for the Materials Select Sector SPDR ETF (ticker XLB), which tracks the S&P 500 Materials Index.

Note that an unfavorable period extends from Trading Day of Year (TDY) # 177 through TDY #190. For 2024, that period extends from the close on 2024-09-13 through 2024-10-02.

We will use the S&P 500 Materials Index starting in 1953 for testing purposes. The chart below displays the hypothetical growth of $1 achieved by holding a long position in the Materials Index only during the TDY #177 to #188 period since 1953.

The table below summarizes the performance of the Materials Index during this period.

What the research tells us…

Win rates of 39% to 46% are not great, but they remind us that these sectors are by no means "doomed" to decline during the abovementioned periods in 2024. The real issue here is deciding where best to allocate investment capital. The historical results above suggest that investors who already hold these sectors carefully consider their exposure. Likewise, those looking for a buying opportunity might want to exhibit patience in the weeks ahead before taking the plunge.