ETF Expert

The last two weeks of March were… in many ways… the most brutal 14 days of the 6-month down cycle. U.S and international stock indexes were clobbered. And the Bear Stearns collapse gave investors genuine reasons to fret continuing woes in the world of credit.

In contrast, the first two weeks of April signaled the possibility that there may be bright lights on the investing horizon. Many financial companies reported earnings that… albeit dismal… beat expectations. And in spite of the recessionary environment, a variety of major players from Intel to Coca Cola to Johnson & Johnson to IBM gave strong guidance.

What you have, then, is a unique opportunity to investigate how stock assets fared going into the deep (3/15/08-3/31/08) and how they fared emerging from the carnage (4/1/08-4/15/08); specifically, the 1-month returns for a variety of regions around the globe are worth inspecting.

They were as follows:

Vanguard Total U.S. Stock Market (VTI) 3.8%
iShares Europe 350 (IEV) 4.9%
iShares Latin America (ILF) 6.9%
Vanguard Emerging Markets (VWO) 7.6%
iShares S&P Asia 50 Index (AIA) 11.5%

The easiest argument for the regional results is… the harder they fell, the higher they rose. Others might simply state that stock assets throughout the world currently have a fair risk-reward relationship; international stocks carry greater risks, but continue to produce higher rewards.

Yet there are two observations that throw off the simplest explanation. For one thing, Latin America did not exactly buckle in the 6-month bearishness (10/15/07-4/15/08) for the rest of the world. In fact, the iShares Latin America Fund (ILF) picked up 7% over those 6 months.

Another relevant point… the iShares S&P Asia 50 Index (AIA) represents 4 highly developed economies in the Pacific Rim. Taiwan, South Korea, Hong Kong and Singapore are hardly "emerging" the way China, India, Brazil, Russia, Latin America, Eastern Europe, the Middle East or Africa are.

It follows that the iShares S&P Asia 50 Index (AIA) recent outperformance over the true emerging economies may be representative of a move to more developed countries with excellent growth potential. Or it may simply be a large bounce off 20%-30 declines from the top.

Either way, one should be wary of oversimplifying. It is also sensible to diversify across regions, as I demonstrated with the BRIC countries and as I showed with the Pacific Rim.

Disclosure Statement: ETF Expert is a web log ("blog") that makes the world of ETFs easier to understand. Pacific Park Financial, Inc., a Registered Investment Advisor with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.