October ETF Outlook — 5 Data-Driven Picks for the Month Ahead

This month, TrendWell Digest’s model highlights XLU, XLK, IJK, IJJ, and SPY. Looking across more than 23 years of history (dataset beginning October 2000), when the same sets of drivers aligned or better for these five ETFs, the basket delivered an average historical annualized return of 21%, meaningfully higher than periods when those signals were weaker.

Markets ended the prior month digesting mixed but moderating inflation, a data-dependent Fed, and steady labor prints, with a slight risk-on tilt as defensives lagged and mega-caps held firm. Those macro undercurrents map closely to the signals below.

XLU | Utilities Select Sector SPDR Fund

Tracks: U.S. regulated electric, gas, and water utilities.

• Financials calm (XLF 3-month volatility at 11% of its history; XLF stdev-3M). Low XLF volatility points to a stable credit backdrop; that historically supports bond-like utility cash flows. When XLF volatility was this low or lower, XLU returned 32% annualized, vs 5% when volatility was higher.
• Front-end spread jump (prior-month % change in the 3-month Treasury vs Fed Funds spread, T3MFF, +536%). A sharp move in T3MFF reflects shifting rate expectations that have historically coincided with a defensive bid for utilities. In similar jumps, XLU returned 24%, vs 5% when the spread was quieter.
• Materials calm (XLB 12-month volatility at 22% of history; XLB stdev-12M). Tamer XLB volatility often accompanies a broader “low-shock” environment that favors stable earners. In those regimes, XLU returned 12%, vs −1% when XLB volatility was higher.

XLK | Technology Select Sector SPDR Fund

Tracks: U.S. large-cap technology.

• Seasonality (month signal = October). October has been historically constructive in this model’s pattern set for XLK; when October registered as a positive month signal, XLK returned 39% annualized, vs 9% when it didn’t.
• Materials stretched (Relative Strength Index of XLB, 14-month frame, at 161% of its norm; XLB RSI). When commodity-linked XLB is overbought, leadership often rotates back to long-duration tech where earnings duration benefits from steadier rates. In those episodes, XLK returned 25%, vs 2% otherwise.
• Growth backdrop firming (prior-month % change in CURRCIR at +392%). A strong move in CURRCIR (a current-conditions proxy) has historically lined up with improving revenue visibility in tech. In those cases, XLK returned 17%, vs 5% when the pulse was softer.

IJK | iShares S&P Mid-Cap 400 Growth

Tracks: U.S. mid-cap growth companies.

• Short-term bill yield impulse (3-month % change in the 1-Year T-bill yield, DTB1YR, +957%). Big front-end yield shifts have historically preceded style rotation favoring quality growth within mid-caps; IJK returned 44% in such surges, vs 7% otherwise.
• Small-cap volatility slightly above average (IJR 12-month volatility at 104% of history). A mild pickup in IJR volatility tends to send flows toward higher-quality mid-cap growers; IJK returned 22%, vs 4% when volatility was lower.
• Energy paused (prior-month return in XLE −1%). When XLE cools, relative performance often shifts toward growth industries with less commodity sensitivity; IJK returned 19%, vs 3% when XLE was rising.

IJJ | iShares S&P Mid-Cap 400 Value

Tracks: U.S. mid-cap value stocks.

• Front-end spread jump (prior-month % change in T3MFF +536%). A sharp move in T3MFF has historically coincided with mean-reversion tailwinds across cyclicals and financials inside IJJ. Result: IJJ returned 64%, vs 9% when the spread was quieter.
• Fed funds change (prior-month % change in effective Fed Funds, DFF, −2%). Small declines in DFF have historically reduced discount-rate headwinds for value cash flows; IJJ returned 20%, vs 6% otherwise.
• Employment momentum flat (3-month % change in BLS series LNU01300000 ≈ 0%). When payroll growth pauses, wage pressure can ease and margins stabilize—historically a constructive setup for mid-cap value. IJJ returned 19%, vs −5% when employment was accelerating.

SPY | SPDR S&P 500 ETF

Tracks: Broad U.S. large-cap equities.

• Seasonality (month signal = October). In the model’s historical pattern set, October has been a positive backdrop for SPY, coinciding with 19% annualized, vs 9% when the signal wasn’t present.
• Materials stretched (XLB RSI, 14-month frame, at 161% of norm). Overbought XLB has often preceded leadership by quality large-caps; SPY returned 19%, vs 1% otherwise.
• Macro series stability (3-month volatility in WGS3MO at 5% of history). Low volatility in this macro series (a liquidity/conditions proxy) aligns with smoother equity trends; SPY returned 12%, vs 10% when volatility was higher.

Why these five—now

The present mix—steady policy guidance, moderating inflation, and rotation away from defensives (XLP, XLV)—lines up with our signals: stretched XLB momentum (supportive for XLK and SPY), stable-to-soft macro shocks (helping XLU), and front-end rate dynamics (T3MFF, DTB1YR) that have historically aided mid-cap styles (IJK, IJJ) as discount-rate headwinds ebb and cyclicals re-rate.

We’ll keep the process clear and data-first—and we hope your portfolio continues to TrendWell.

This article is for informational purposes only and does not constitute financial advice.

Sources:
Federal Reserve (policy statements; rate series DFF, DTB1YR, T3MFF).
U.S. Bureau of Labor Statistics (employment series LNU01300000).
FRED / St. Louis Fed (macro time series), and public ETF data (sector/style ETFs: XLB, XLE, XLF, XLV, IJR, IJS).