ETF Expert

Some may believe that the equity markets were firing on all cylinders until Dubai World’s debt struggles became headline fodder over T-Giving. Others have suggested that investors began ratcheting back risk a week earlier (circa 11/18); that’s when a surprise drop in new home construction and unforeseen strength in the U.S. dollar rattled stock prices for 3 consecutive days. Still others point to the fact that the S&P 500 is in the same place that it was in mid-October.

Granted, the S&P 500 wasn’t able to hold its intra-day peak of 1120, let alone the psychological 1100 level. In fact, it is trading around 1093 as I type. This is the exact price on the S&P 500 from November 9, 2009… 1 month ago.

I thought it might be intriguing to look at the ETFs that have made noteworthy progress over that period — a time frame where the broader U.S. markets went nowhere. Could those ETFs be telling us something about the state of the cyclical bull rally?

Strangely, one might not find a more eclectic match in a month-over-month assessment. The surge in the Claymore ARCA Airline Fund (FAA) is primarily attributable to lower fuel costs and recent industry-wide upgrades by Morgan Stanley analysts.

A more compelling story, however, is the recent interest in defensive stock assets with significant yield. All year long, investors have shunned utilities and passed on telecom… until now.

In my estimation, there’s clear enough evidence that a partial shift of assets are moving towards defensive equity positions. Yet by the same token, it may have just as much to do with a pursuit of yield/dividend capture strategies that often occur in December.

Of course, if the “risk trade” is coming to a close… if the strengthening of the U.S. dollar is causing folks to unwind their riskier growth stock holdings… how does one explain interest in SPDR Semiconductors (XSD) and Market Vectors Agribusiness (MOO)? Semis are widely tracked as a reliable precursor for economic recovery while agricultural-related companies are at the core of the global growth/worldwide demand story.

It seems to me, the investment community may be split. Or, perhaps, the global growth story is intact, yet the headwinds of a strengthening U.S. currency is causing some rotation into defensive dividend-producers.

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”, via podcast or on your iPod.

Disclosure Statement: ETF Expert is a web log (”blog”) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. The company and/or its clients may hold positions in the ETFs, mutual funds and/or index funds mentioned above. The company does not receive compensation from any of the fund providers covered in this feature. Moreover, the commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.

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