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Last January, the Dow Jones Industrial Average lost 8.1% in the first 10 trading days of the year. That was the worst performance to start a year ever, going back to 1897.
And over the past 15 years, January has been one of the weakest months for the stock market.
So what sectors are safe if we experience another January selloff in 2017?
If you examine the nine major stock market sectors covered by the SPDR ETFs, historically the best performers in January are Health Care Select Sector SPDR ETF (NYSE: XLV) and Technology Select Sector SPDR ETF (NYSE: XLK).
But last January, XLV was hit hard, losing 6.1%.
XLK fared better, losing 1.9% for the month. This was actually the third-best-performing S&P sector.
Safer Sectors for a January Selloff
The two major sectors that avoided the January selloff, and in fact were up nicely on the month, were Utilities Select Sector SPDR ETF (NYSE: XLU) and Consumer Staples Select Sector SPDR ETF (NYSE: XLP). XLU gained 2.4% and XLP gained 1.9%.
Meanwhile, the S&P 500 Index lost 4.8% over the same time period, and was down over 11% at its lowest point that month.
Utilities and Consumer Staples are generally considered defensive shelters for when the market goes sour, and they held up that role during last year’s selloff.
January Selloff: Not a Certainty
Tech stocks aren’t often considered a safety sector, but they historically tend to be strong in January and outperformed the market last January.
Now, another market selloff in January isn’t a certainty by any means. But history does sometimes repeat itself. And we are certainly a bit overextended to the upside, following the strong rally since the election.
So it’s prudent to consider parking some money into these three sector ETFs when we approach January.