ETF Expert

It's been rather startling to watch the equity markets make a run at 6 consecutive weeks of gains. Weren't folks all but promising Dow 5000 back at Dow 6500? Didn't the S&P 500's 666 mark seem so ominous… that the index appeared destined for 500?

Scores of bears haven't thrown in the towel. And pullback believers, including myself, are almost praying for a bit of profit taking. (Nothing truly wonderful ever seems to come from straight-line upward movement, just as nothing apocalyptic ever seems to come from free falling markets.) 

Yet with Roubini predicting the S&P 500 to bottom at 600 as well as predicting the economy to be stuck in recession throughout 2010, market doom-n-gloom doesn't seem quite as "doomy-n-gloomy." Fits and starts… sure. Retesting and rethinking… it seems quite probable. But the idea of breaking the March lows feels less likely than setting higher lows in the 700s for the S&P.

Regardless of how it all shakes out, one has to question what happened to the health care sector. In the bear's 18-month reign of terror, health care had arguably held up the best. Take a look at Vanguard Health Care ETF (VHT) versus ETF sector funds like Tech (XLK), Energy (XLE), Consumer (XLY), Utilities (XLU) and Materials (XLB).

Yet since the market lows of March, 2009, healthcare seems to have caught a cold. Vanguard Health Care ETF (VHT) has eked out a victory over another defensive stalwart, Utilities (XLU). However, the hot money has been pouring into materials and technology.

Momentum investing typically favors growth industries. And many believe the greatest room for growth will come from technology and resource-related activity.

That said, while so many corporations find themselves with earnings declines, healthcare is the one area, recession and all, with earnings growth. With some companies still unwilling to forecast (e.g., Intel, etc.), and with others merely beating lowered expectations, might the longer term investor win with health care as the earnings come in? Who has been more successful at acquisitions than pharma — cash rich and unencumbered by the need to slash dividends or borrow from a TARP-like program?

Logic might tell one that the prices of health care companies have fallen much faster than their earnings… that prospects are bright based on the aging of baby boomers… and that "still-going-strong" contenders (e.g., Johnson and Johnson, Pfizer, Abbott Laboratories, Merck & Co., Amgen, etc.) are likely to give decent guidance here in earnings season. But logic never beats fear in the investment universe; specifically, there's fear of a total economic depression competing with a fear of missing out on the next bull market upswing.

If you're trying to steer clear of fear-based decisions, SPDR Pharmaceuticals (XPH) has yet to rebound much from the March lows. If short sellers, profit takers or bearish sideliners return to derail a 6-month rally, one might prefer the "steady Eddies" represented in this basket.

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.

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.