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The first quarter of 2025 created dramatic divergence in sector ETF performance, with the Technology Select Sector SPDR Fund (XLK) dropping 17.1% while losing $417.3 million, according to data from etf.com.
Throughout the quarter, growing trade tensions and speculation about potential tariffs weighed on tech companies with international supply chains, culminating in President Donald Trump's Wednesday announcement of planned tariffs. The Consumer Discretionary Select Sector SPDR Fund (XLY) similarly fell 15.2% during the three-month period, shedding $544.2 million as markets anticipated higher future costs.
Sector ETF Split
The quarter showed a clear split: Tech and consumer companies tumbled while defensive sectors gained. This pattern reveals how investors shifted money to safer sectors as trade policy concerns grew, even before any tariffs were actually implemented.
With a decline of 5.2% over the quarter, the Communication Services Select Sector SPDR Fund (XLC) still managed to attract $215.5 million in new investments despite its performance struggles.
Manufacturing concerns led to a 4.9% drop for the Industrial Select Sector SPDR Fund (XLI) during the three months, accompanied by outflows of $71.9 million.
Despite recording a 1.5% loss across the quarter amid broader market volatility, the Financial Select Sector SPDR Fund (XLF) gained an impressive $2.5 billion in fresh capital as investors bet on the sector's long-term outlook.
Defensive Sectors Weather Trade Uncertainty
Among defensive plays, the Consumer Staples Select Sector SPDR Fund (XLP) stood out with a 5.3% gain over the three months, attracting a modest $8.4 million in new investments.
Positive performance of 3.4% wasn't enough to prevent $220.1 million in outflows from the Healthcare Select Sector SPDR Fund (XLV) during the quarter, showing a disconnect between returns and investor sentiment.
Investors poured $936 million into the Utilities Select Sector SPDR Fund (XLU), which added 3.1% over the period as its regulated pricing structures offer stability during uncertain times.
The Real Estate Select Sector SPDR Fund (XLRE) edged up 0.6% during the quarter, attracting $250.4 million in fresh investments.
Defying its $104.7 million outflow, the Materials Select Sector SPDR Fund (XLB) managed a slight 0.34% gain across the three months.
Experiencing the largest exodus of any sector at $2.6 billion, the Energy Select Sector SPDR Fund (XLE) remained nearly flat with a minimal 0.07% decline over the quarter, suggesting investor concerns about energy markets extend beyond just trade tensions.