ETFs that Weathered the Lost Decade Shine Again
The concept of 'Boxpy' was once used to describe the KOSPI in South Korea's local stock market, but it also referred to a period known as the 'lost decade' when the S&P 500 index struggled. From 2000 to 2009, the US stock market experienced significant downturns, including the dot-com bubble collapse and the global financial crisis. If an investor had put money into an S&P 500-followed exchange-traded fund (ETF) at the beginning of 2000, they would have broken even by 2007, but by the end of 2009, they would have lost 21.2%.
However, not all US stocks suffered during this period. The Energy Select Sector SPDR Fund (XLE), a bundle of U.S. oil refining and energy companies, actually tripled in value from 2000 to 2009, with an average annual composite growth rate (CAGR) of 10.5%. This is due to the sharp decline in ship traffic in the Strait of Hormuz amid the conflict between the United States and Iran, raising concerns about disruptions in global crude oil supply.
XLE's main holdings include Exxon Mobil (21.9%) and Chevron (16.6%), which are well-positioned to benefit from higher international oil prices. Utility companies like NextEra Energy (12.8%) are also expanding their investment in power generation and transmission networks, driven by the rapid increase in AI data centers.
The Utilities Selector SPDR Fund (XLU) has a similar track record, with a 65.2% return from 2000 to 2009, and an average annual CAGR of 4.7%. XLU's top holdings include NextEra Energy (12.8%), which operates two key subsidiaries: Florida Electric Power Company (FPL) and NextEra Energy Resources (NEER).
The Consumer Staples Select Sector SPDR Fund (XLP), a bundle of essential consumer goods companies, also held up well during the lost decade, rising 58.5% from 2000 to 2009. XLP's top holdings include Walmart (11%), Costco (9.1%), Procter & Gamble (7.3%), Coca-Cola (6.4%), and Philip Morris (5.9%).
All three ETFs have an actual cost ratio of only 0.08%, making them attractive options for long-term investment. They are also suitable for tax-saving accounts, as they can be purchased in individual retirement pensions (IRP), personal comprehensive asset management accounts (ISA) accounts, and pension savings funds.