The Performance of Sector ETFs at Long Horizons

This study evaluates the performance of 528 sector exchange-traded funds (ETFs) relative to T-bills and the broad stock market from 2001 to 2022. Mean annual returns for sector ETFs range from 5.83% in the utilities sector to 12.01% in the technology sector, compared with an average annual return of 9.80% for SPY. Over their lifetimes, the technology sector delivers the strongest performance relative to the broad market, outperforming SPY by 18.50%, while materials ETFs perform the worst, underperforming SPY by 125.06%. Although 68% of sector ETFs outperform their corresponding T-bills over their lifetimes, only 30% generate higher returns than the broad market. On a risk-adjusted basis, most sector ETFs also underperform the market. Health care and technology are the only sectors with positive excess risk-adjusted lifetime returns, at 62.36% and 38.17%, respectively. In contrast, the materials sector exhibits the weakest lifetime performance, with an excess risk-adjusted return of −139.79%.