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Should You Shy Away from the Homebuilders (XHB, EPP, EFA, OIH)

18 July 2007 at 11:15 am by Gary Gordon     Bookmark and Share    Follow EtfExpert on Twitter

Fed Chairman, Ben Bernanke, gave a caustic report on economic activity today. Specifically, Mr. Bernanke laid out the following:

  • The U.S. economy is likely to continue growing at a moderate pace
  • International economies may continue growing rapidly, though global inflation may become worrisome
  • Energy and commodity prices may continue to increase
  • The value of the U.S. dollar may continue to decline
  • The housing market is unlikely to recover soon

Tom Lydon of ETFTrends.com provided a breakdown of ETFs that are likely to benefit and/or be hurt by the above-listed concerns. For example:

1. If energy and commodity prices increase, then the Oil Services HOLDRs (OIH) may be a strong place to park your investment dollar. Year-to-date, OIH has put together a 27%+ run.

2. With international economies lighting up the sky, many regional ETFs have followed suit. Asia-Pacific excluding Japan (EPP) is up 23% in 2007. And the popular European proxy, the iShares MSCI EAFE Index (EFA) has amassed 12.5% YTD.

3. With a struggling real estate environment not likely to change in a flash, a number of housing-related stock assets are getting hammered. The SPDR S&P Homebuilders Fund (XHB) has turned in negative numbers, a dismal -20% thus far.

Disclosure Statement:  As a Registered Investment Advisor, Pacific Park Financial, Inc. may hold positions in the ETFs, mutual funds and/or index funds mentioned above.

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