{"id":2144,"date":"2022-09-12T11:07:28","date_gmt":"2022-09-12T15:07:28","guid":{"rendered":"https:\/\/www.etfrc.com\/articles\/?p=2144"},"modified":"2022-09-12T11:07:29","modified_gmt":"2022-09-12T15:07:29","slug":"benchmark-sector-etfs-week-in-review-2","status":"publish","type":"post","link":"https:\/\/www.etfrc.com\/articles\/index.php\/2022\/09\/12\/benchmark-sector-etfs-week-in-review-2\/","title":{"rendered":"Benchmark & Sector ETFs: Week in Review"},"content":{"rendered":"\n

Week Ending September 9, 2022<\/h4>\n\n\n\n

All major equity benchmark ETFs bounced higher last week, with more economically-sensitive small- and mid-cap stocks outperforming their large cap counterparts in the S&P 500 SPDR (SPY<\/a>). Shares in foreign developed markets also rallied, but Emerging Markets were a laggard with EEM<\/a> gaining only 0.6%.<\/p>\n\n\n\n

For this week’s valuation update we look at forward Price-to-Sales ratios (P\/S) versus each fund’s average over the past 10 years. In contrast to the Price-to-Earnings ratios examined last week, U.S. Large caps trade at substantial premiums to their average P\/S ratios while small caps are in line with averages. (This may be defensible since margins are higher than they used to be). Meanwhile foreign stocks continue to trade a steep discounts to their long-run average P\/S.<\/p>\n\n\n\n

<\/div>\n\n\n\n

TABLE 1: Major Benchmarks: Weekly Total Returns and Valuation Update<\/strong>
Week ending September 9, 2022<\/em> <\/p>\n\n\n\n

Ticker<\/strong><\/td>Fund<\/strong><\/td>Return<\/strong><\/td>Fwd. P\/S<\/strong><\/td>10 yr. Avg<\/strong><\/td>Prem\/Disc.<\/strong><\/td><\/tr>
SPY<\/a><\/td>SPDR S&P 500 ETF Trust<\/td>3.7%<\/td>2.3<\/td>2.1<\/td>9.5%<\/td><\/tr>
QQQ<\/a><\/td>Invesco QQQ Trust<\/td>4.0%<\/td>3.9<\/td>3.2<\/td>21.9%<\/td><\/tr>
MDY<\/a><\/td>SPDR S&P Midcap 400 ETF Trust<\/td>4.4%<\/td>1.2<\/td>1.1<\/td>9.1%<\/td><\/tr>
IWM<\/a><\/td>iShares Russell 2000 ETF<\/td>4.1%<\/td>1.1<\/td>1.1<\/td>0.0%<\/td><\/tr>
EFA<\/a><\/td>iShares MSCI EAFE ETF<\/td>3.3%<\/td>1.2<\/td>1.5<\/td>-20.0%<\/td><\/tr>
EEM<\/a><\/td>iShares MSCI Emerging Markets ETF<\/td>0.6%<\/td>1.2<\/td>1.7<\/td>-29.4%<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Source: FactSet Research Systems and ETF Research Center. <\/em> <\/p>\n\n\n\n

<\/div>\n\n\n\n

Among sectors, while all 11 Sector SPDRs were up last week there was wide divergence between them. Consumer Discretionary (XLY<\/a>) gained 5.8% at the high end while Energy (XLE<\/a>) managed a gain of “only” 0.8% in the face of falling oil prices. Energy’s price-to-sales ratio, which is at a 23% discount to its 10 year average suggests there may be room for further upside if oil prices (and therefore Energy sector revenue) can find some support around current levels.<\/p>\n\n\n\n

The only sector trading at a bigger price-to-sales discount than Energy is Communication Services (XLC<\/a>), which is also at a P\/E discount of about 13% versus its long run average (based on all available history of just over 4 years). At the other end of the spectrum, Technology (XLK<\/a>) trades at a whopping 39% premium to its 10 year average P\/S ratio, followed by\u2014of all things\u2014Utilities (XLU<\/a>) at a 30% premium. <\/p>\n\n\n\n

This suggests to us that investors may be pricing Utilities’ defensive nature a little too aggressively, even given all the economic uncertainty, and potentially positioning shares for a valuation correction (see Figure 1 below).<\/p>\n\n\n\n

<\/p>\n\n\n\n

<\/div>\n\n\n\n

TABLE 2: Major Sectors: Weekly Total Returns and Valuation Update<\/strong>
Week ending September 9, 2022 <\/p>\n\n\n\n

Ticker<\/strong><\/td>Fund<\/strong><\/td>Return<\/strong><\/td>Fwd. P\/S<\/strong><\/td>10 yr. Avg<\/strong><\/td>Prem\/Disc.<\/strong><\/td><\/tr>
XLC<\/a><\/td>Communication Services Select Sector SPDR*<\/td>3.3%<\/td>1.8<\/td>2.5<\/td>-28.0%<\/td><\/tr>
XLY<\/a><\/td>Consumer Discretionary Select Sector SPDR<\/td>5.8%<\/td>1.9<\/td>1.7<\/td>11.8%<\/td><\/tr>
XLP<\/a><\/td>Consumer Staples Select Sector SPDR<\/td>2.0%<\/td>1.6<\/td>1.4<\/td>14.3%<\/td><\/tr>
XLE<\/a><\/td>Energy Select Sector SPDR<\/td>0.8%<\/td>1<\/td>1.3<\/td>-23.1%<\/td><\/tr>
XLF<\/a><\/td>Financial Select Sector SPDR<\/td>4.5%<\/td>2.3<\/td>2.2<\/td>4.5%<\/td><\/tr>
XLV<\/a><\/td>Health Care Select Sector SPDR<\/td>4.4%<\/td>1.8<\/td>1.7<\/td>5.9%<\/td><\/tr>
XLI<\/a><\/td>Industrial Select Sector SPDR<\/td>3.4%<\/td>1.8<\/td>1.5<\/td>20.0%<\/td><\/tr>
XLB<\/a><\/td>Materials Select Sector SPDR<\/td>5.0%<\/td>1.8<\/td>1.7<\/td>5.9%<\/td><\/tr>
XLRE<\/a><\/td>The Real Estate Select Sector SPDR*<\/td>4.3%<\/td>6.6<\/td>7.3<\/td>-9.6%<\/td><\/tr>
XLK<\/a><\/td>Technology Select Sector SPDR<\/td>3.3%<\/td>5.4<\/td>3.9<\/td>38.5%<\/td><\/tr>
XLU<\/a><\/td>Utilities Select Sector SPDR<\/td>3.7%<\/td>3<\/td>2.3<\/td>30.4%<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Source: FactSet Research Systems and ETF Research Center. <\/em> *Note: Fewer than 10 years of valuation history available.<\/em> <\/p>\n\n\n\n

<\/div>\n\n\n\n

FIGURE 1: Utilities Sector Historical Price-to-Sales Multiple<\/strong>
Screengrab from www.etfrc.com\/XLU<\/a><\/em><\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Source: ETF Research Center<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Performance review and valuation update for the week ending September 9, 2022.<\/p>\n","protected":false},"author":2,"featured_media":2131,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[222,6],"tags":[22,49,202,259,137,4],"class_list":["post-2144","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-fundamentals","category-sector-etfs","tag-eem","tag-efa","tag-iwm","tag-mdy","tag-qqq","tag-spy","description-off"],"_links":{"self":[{"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/posts\/2144","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/comments?post=2144"}],"version-history":[{"count":21,"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/posts\/2144\/revisions"}],"predecessor-version":[{"id":2167,"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/posts\/2144\/revisions\/2167"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/media\/2131"}],"wp:attachment":[{"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/media?parent=2144"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/categories?post=2144"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/tags?post=2144"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}