Broad market indexes have surged over the last few months, with semiconductors leading the charge. Since the end of March, the VanEck Semiconductor ETF (SMH) is up over 60%, making it the top performer of the 34 sector ETFs I track. The table below lists the 10 sectors furthest above their 200-day moving average. SMH easily outpaces all other sectors, sitting more than 50% above the moving average. The next most overextended sector by this metric is the Invesco Solar ETF (TAN).
This next table ranks ETFs by their distance from their 50-day moving average. The iShares Software ETF (IGV) is first on the table with SMH trailing behind.
This week, I’m looking at historical instances when the ETFs extended above these moving averages. Let's carefully consider whether to grab onto the high-flying sector or look elsewhere for solid returns going forward.
Using my list of 34 sector ETFs, I found times their price reached 50% above their 200-day moving average, like SMH recently did. There were 16 prior instances with a summary of coinciding forward returns in the first table below. The second table summarizes the returns if you purchased the S&P 500 ETF (SPY) instead.
The returns are interesting and mixed suggesting volatility going forward. The ETFs averaged a 1% gain over the next two weeks beating the SPY 63% of the time. Though over the next month they were down 0.6% on average and beat the SPY only 33% of the time. At that time, the ETFs seemed to take off again because they averaged about 15%, and 22% returns over three and six months, respectively. The one-year average return of 18% seems fair but ETF returns beat SPY just 33% of the time over the next year.
This next table ranks ETFs by their distance from their 50-day moving average. The iShares Software ETF (IGV) is first on the table with SMH trailing behind.
This week, I’m looking at historical instances when the ETFs extended above these moving averages. Let's carefully consider whether to grab onto the high-flying sector or look elsewhere for solid returns going forward.
Using my list of 34 sector ETFs, I found times their price reached 50% above their 200-day moving average, like SMH recently did. There were 16 prior instances with a summary of coinciding forward returns in the first table below. The second table summarizes the returns if you purchased the S&P 500 ETF (SPY) instead.
The returns are interesting and mixed suggesting volatility going forward. The ETFs averaged a 1% gain over the next two weeks beating the SPY 63% of the time. Though over the next month they were down 0.6% on average and beat the SPY only 33% of the time. At that time, the ETFs seemed to take off again because they averaged about 15%, and 22% returns over three and six months, respectively. The one-year average return of 18% seems fair but ETF returns beat SPY just 33% of the time over the next year.
5 months ago
