The financial media continue to perpetuate a “risk trade on, risk trade off” myth. Yet a better representation of what’s taking place in market-based securities is “developed market risk off, emerging market risk on.”
Is it true that¬†nearly every U.S. Treasury Bond ETF has been hitting 52-week highs on a daily basis? Absolutely. Yet you shouldn’t expect the treasury bond bonanza to last for too much longer.
Gold ETFs aren’t far from hitting all-time records either. Indeed, that’s another sign that risk aversion is present and accounted for.
Yet¬†Emerging Market Bond ETFs and a number of Emerging Market Stock ETFs… both of which are higher up on the risk scale…¬†are also hitting new 52-week peaks.¬†That’s hardly consistent with an across-the-board dumping of risk assets. Moreover, the U.S.¬†Dollar Index is¬†still 6%+ lower than it¬†was in early July…¬†when the U.S. stock market¬†hit its corrective period low point.
So what’s really happening? Investors are shunning risks that are associated with the most uncertainty. 15-year lows on home sales suggest a continuation of struggles for real estate (i.e., homebuilders). Lack of clarity on¬†FINREG legislation makes¬†the investment in financial stocks… especially smaller¬†stocks in the financial sector… very undesirable. What’s more, oil prices below $75 per barrel and the absence of a clear energy policy have continued to slam¬†Alternative Energy ETFs.
|ETFs Hitting 52-Week Lows On 8/24/10||¬†||¬†||¬†|
|¬†||¬†||¬†||¬†||¬†||¬†||Approx % From 52-Week High|
|iPath DJ AIG Natural Gas (GAZ)||¬†||¬†||-45.72%|
|First Trust Global Wind (FAN)||¬†||¬†||¬†||-41.17%|
|iShares DJ Home Construction (ITB)||¬†||¬†||-30.75%|
|PowerShares Dynamic Banking (PJB)||¬†||¬†||-23.47%|
|WisdomTree Japan Total Dividend (DXJ)||¬†||¬†||-18.64%|
Disclosure Statement: ETF Expert¬†is a web log (‚ÄĚblog‚ÄĚ) 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. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert disclosure details here.