Until recently,¬†investors showed little interest in hedging against a potential collapse in the S&P 500.¬†Some might have even described the environment as complacent with the CBOE S&P 500 Volatility Index (VIX) spending most of the year in the “mid-teens.”
Now the VIX is back above 20. At that level, options participants anticipate¬†an “annualized” change of 20%¬†over a 30-day period (5.7%¬†over¬†30 days).¬†Even more noteworthy? The popular “fear gauge” closed above its 100-day moving average for the first time in 2012.
The markets were relatively sanguine just 5 short trading days ago. Since that time,¬†however, many¬†sector investments representing¬†cyclical growth in the U.S. economy have dropped below important trendlines. Consumer Discretionary (XLY), Technology (XLK) and Financials (XLF)¬†are all below¬†respective 50-day¬†moving averages.
In mid-April, I discussed 5 influential ETFs that had been holding¬†back the domestic and international markets; each¬†had broken down on a long-term technical basis. They included¬†iShares MSCI Brazil (EWZ), SPDR Select Energy (XLE), Vanguard¬†Europe (VGK), China 25 Index (FXI) and the SPDR Gold Trust (GLD).
Here in the second week of May,¬†the aforementioned “influencers”¬†have fallen even further. Along with them, iShares MSCI¬†Australia (EWA) and¬†Vanguard All-World ex U.S. (VEU) have also entered technical downtrends.
With world stocks dropping precipitously, and with U.S. stocks also weakening,¬†has there¬†been¬†any equity enthusiasm? Only in the business arenas¬†that are less sensitive to economic cycles.
Below you can find¬†5 ETFs¬†that weathered the¬†storm of¬†hard core selling in May. You could consider adding non-cyclicals to your current portfolio and/or, at the very least, have a plan to protect against downside risk.
|Sell In May? These ETFs Didn’t Go Away||¬†||¬†|
|Select Sector SPDR Utilities (XLU)||¬†||-0.1%|
|iShares FTSE Residential REIT (REZ)||¬†||-0.3%|
|Guggenheim S&P Equal Weight Con Staples (RHS)||-0.4%|
|iShares S&P Global Telecom (IXP)||¬†||-0.5%|
|First Trust Biotech (FBT)||¬†||¬†||-0.5%|
|S&P 500 SPDR Trust (SPY)||¬†||¬†||-3.3%|
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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.