A diversified portfolio of exchange-traded funds continued to outrace the beleaguered market in May, with the ETF 50 Index™, the industry's leading measure of ETF performance, rising 1.8%.

The investable form of the S&P 500 Index, SPDR S&P 500 Trust (SPY), managed a 1.5% gain in the month, topping foreign developed markets as the U.S. dollar staged a small rally. iShares MSCI EAFE Index ETF (EFA) eked out a 1.2% advance.

The United States is where the money is now, and that's where ETF investors are reaping the biggest rewards. Oil and U.S. stocks have been in a tug of war for months, and U.S. stocks are starting to win.

Domestic markets showed their greatest strength at the most economically sensitive end of the spectrum, with PowerShares QQQQ (QQQ), representing the Nasdaq 100, surging 5.9%, and iShares Russell 2000 Index (IWM), representing small-capitalization stocks, ahead 4.6%.

By contrast, iShares MSCI Emerging Markets Index (EEM) gained only 3.2% in the month.

But the domestic rally is riddled with troublesome holes. The group that led stocks into a bear market, represented by Financial Select Sector SPDR (XLF), tumbled 6.6% in May as losses in that sector continued to spread.

The month's biggest gainer was iShares MSCI Brazil Index (EWX), which roared ahead 9.9%, buoyed by reports of the largest oil find in at least a decade off its shores.

Energy Select Sector SPDR (XLE) spurted 5.2%.

The ETF 50 Index™ has advanced 5.2% in the last three months but remains down 2.2% since May 2007. The 500 Spider is up 4.9% in three months and down 8.5% in the last 12.

The ETF 50 Index™ represents the price-only asset-weighted price performance of the 50 largest exchange-traded funds, which account for nearly 75% of the industry's total assets. The index consists of a broadly diversified universe of funds representing domestic and foreign stocks, bonds and commodities, and is a better indicator of actual investor returns than indices tied to particular markets.