ETF Expert

Okay… the boys and girls down under haven’t been "feeling it" this year. The iShares Australia Index Fund (EWA) is down a few more percentage points than the S&P 500 SPDR Trust (SPY) in 2008.

Carl Delfeld for ETFXray explains that climbing fuel costs, escalating mortgage payments, and rising interest rates have taken their toll. Add a higher debt-to-household ratio than that of the U.S., mix in slowing demand for resources, and Australia is looking less attractive by the minute.

Granted, inflation has been reigned in down under. Yet stimulus may be needed to keep slow growth from turning into no growth.

The iShares Australia Index Fund (EWA) is down 30% in the worldwide bear… and 16% YTD. With a 35% weighting in financials and another 30% in materials, about the only tangible strength is a 4%+ yield. Otherwise, one would need to see evidence of global growth increasing, not slowing, for EWA to catch fire once more.

The iShares Global Materials Fund (MXI) has also fallen into a world of ill-will. The companies are reporting record profits. And most have expressed very positive future outlooks.

So what gives? While Australia (EWA) first caved due to domestic housing concerns and worldwide "coupling," it experienced its second leg down due the unprecedented commodity/resource sell-off. Yet Global Materials (MXI) has simply been the victim of sector rotation away from strength and into weakness (e.g., consumer cyclical, financials, REITs, etc.).

However, the selling seems amazingly overdone. Virtually every company in the Global Materials Fund(MXI) is a winner… or will merge with a bigger-time winner. At the very least, one might expect a technical rebound. At best, fundamentals will drive the shares higher alongside faith in a global economic revival.

And then there’s U.S. retail — the biggest enigma of them all. If the consumer is dead, why have the SPDR Retail (XRT) and the Retail HOLDRs (RTH) out-hustled the major U.S. benchmarks in 2008? Answer: 30% losses in 2007 make it easier for bargain-hunting investors to go shopping.

Nevertheless, the 9% and 6% YTD respective losses for the above-mentioned funds are hardly terrific. What’s more, most market-watchers attribute the "hanging-in-there-ability" to discounter success a la Wal-Mart.

Regardless, one may want to keep an eye on the ability or inability of these funds to break above long-term trendlines. If they were able to convincingly eclipse 200-day moving averages, the case for ignoring the media and trusting the trends would be enhanced greatly.

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.