ETF Expert

At the start of 2009, if you had fallen victim to the apocalyptic prophecies of a 21st century "Great Depression," you probably wouldn't have invested at all. In fact, you'd probably have squirreled away what was left of your depleted savings.

Yet if you had decided to participate, you may have been more apt to show prudence; that is, you may have chosen investments that have historically weathered recessionary periods. Those sectors include health-care, consumer staples (e.g., toothpaste, toilet paper, bread etc.), and utilities.

Still, you'd have stayed away from technology, as both consumers and businesses tend to hold off on upgrade plans. You'd have distanced yourself from resource-related energy and materials, since international trade had been battered and infrastructure projects had been stalled. And consumer discretionary items? Who could afford the feel-goods of the "buy-now-pay-later" credit card era?

For some then, with the rejuvenation of market results, it must feel like… "Damned When I Do, Damned When I Don't."

Those who played it completely safe in cash have watched many investments offer stellar returns. Even the mainstream indexes have turned positive on the year. Worse yet, those who chose to be more cautious, while still participating, were disappointed by the poor showing of so-called recession-beaters.

Do these gains and losses look like the results one might expect from a worldwide economic catastrophe? Hardly. But does it genuinely look like the anticipation of big time expansion ahead? On that question, I say… maybe not.

While it is true that all stock assets have gained ground off the market lows, and while one would expect riskier assets to outperform in a new bull market, it is doubtful that you'd see such a poor showing from safer stocks in a true blue bull. Chalk this up to global markets anticipating an opportunity in risk… not an opportunity in true recovery. Not yet, anyway.

Granted, the growth segments fell the hardest and the furthest. So it is only natural to expect those areas to respond most favorably.

Yet it is near impossible to explain the enthusiasm for iShares Global Consumer Discretionary (RXI) with a straight face, while a sensible safer haven like iShares Global Utiltiies (JXI) gets shunned. What you can say is that the trend is the trend… and RXI is in an uptrend; JXI is not.

From here, the smart money will take profits. It'll be a bit more discriminating into the summertime.

That's not to say that riskier assets won't provide the best rewards… they will indeed! But they'll also be the areas most prone to profit-taking, pull-backs and corrections. A genuine bull market will need more than a hunger for the riskiest assets… it'll need a modest appetite for solid stocks in boring segments as well.

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 Adviser 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.