I looked into this question when building a picnic table out of construction lumber. I was looking for a clear finish.
It turns out that all clear finished break down under sunlight, so the most durable finish is paint.
But if you want a clear finishclear finish, it seems the best thing is spar varnish, the kind you have to go to a boating store to get (e.g. epiphanes). It is made to stretch a little more to accomodate the extra wood movement you get with outdoor temp/humidity swings, plus it resists sunlight for longer. That said, you still will have to reapply regularly, I think every year or two.
stain is a compromise between the two. Like paint, it contains pigment, which offers sun protection. I assume less pigment means less protection. But it will allow the wood to look like wood (somewhat).