ETF Expert

The global economy is supposed to record a worldwide drop in GDP across 2009. The fear associated with GDP declines includes a perceived reduction in demand for resources. Neverthelessess, after an abysmal start to the year, the Basic Materials Select SPDR (XLB) is logging 3 month gains of nearly 5% through 3/25/09.

The iShares Networking Fund (IGN) was one of my top "if Obama wins" selections.  It seemed to fare relatively well shortly before and after election day. Then the post-inaugural uncertainty seemed to question the viability of expanding the U.S. technological infrastructure. (Still, cash-rich tech companies are being viewed as long-term bargains and the 3-monthresults show 4% unrealized profits.)

Crude oil didn't seem to be slowing its decline early in the new year. Then you had OPEC threatening to cut supply. Surprising economic numbers came in to boost the possibility of greater demand. China announcedmore stimulus that suggested still more pick-up in demand, while strikes in Brazil seemed to threaten supply. All of a sudden… oil began to hit 3-month highs.(Not surprisingly, then, the SPDR Select Energy Fund (XLE) has also managed a 3-month gain of 3%.)

Is everything suddenly peachy keen? Hardly!

But technology and energy appear poised to help get the U.S., and the world, out of the doldrums. At the same time, the demand for chemicals, farm products, timber, rocks, semi-precious metals, base metals and other raw materials that we mine for and develop can only increase if the global economy were to pick back up.

The curious question that I might ask is: "If an increased demand for natural resources is taking root… and this is what is boosting Energy (XLE) and Materials (XLB), why wouldn't there be similar enthusiasm for cyclical segments such as Consumer Discretionary (XLI), and Industrials (XLI)?" There seems to be a little more optimism for companies engaged in uncovering/developing/delivering resources than there is for manufacturing and end-product retailing.

Clearly, every sector has benefited from the monstrous turnaround in financials. The idea of stabilizing the financial sector is at the top of the "fix-it-now"list. Yet in spite of the record setting gains off of the bottom, financials remain down sharply over the last 3 months.

Moreover, there's a bit of irony in the slight losses in perceived safer havens like Health Care (XLV) and Utilities (XLU). It may be a reflection of greater risk-taking or it may be reflective of a changing of the guard.

Tech, Energy and Materials may in fact be investments you wish you had… as long as there's marginal improvement in world economies. That's the obvious connection. If you believe government stimulus worldwide will have some collective positive effect, then you have to look at traditional early stage winners like technology. And if you believe that commodity inflation will occur alongside that stimulus, Energy and Materials may wind up being your best selections.

If you'd like to learn more about ETF investing… then tune into "In the Money With Gary Gordon." You can listen to the show "live" or via podcast or on your iPod at this link.

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.