Trend: REIT and Retail ETFs appear to be rebounding in 2008, while Resource ETFs continue their rise.
ETF Expert Gary Gordon describes some ETFs that have been affected by some significant global trends. Excerpts below.
Link: ETF Expert: The "3 Rs" in ETFs: Resources, REITs and Retail.
The prevailing winds on Resources ETFs would suggest that the boom shall continue. One can invest in natural resources companies through the iShares Natural Resources (IGE) fund, though nearly 70% of the sector weighting is in energy companies. If you prefer more iron, steel and silver, companies that extract minerals and metals can be had in the S&P Metals and Mining Fund (XME).
Where's the water? The Powershares Water Resources Fund (PHO) is a high-volume investment in water services companies. It is more of an infrastructure demand play than a direct investment in the commodity. One can diversify across the commodity landscape of oil, wheat, livestock, natural gas, gold, silver, steel and so forth with the Dow Jones Commodity Index (DJP).
While Resources ETFs are currently booming in a very big way, what should we make of areas that have already gone bust? The consumer spending slowdown has crippled retailers. And the financial credit crisis made real estate investing trusts one of the least desirable areas in 2007.
Ahhhh... but some investors are out bargain hunting. The Vanguard REIT Index (VNQ) is above its long-term trendline and has outperformed the broader stock market in 2008. Ditto for the Retail HOLDRs (RTH).
That's right. Some of the worst investments in 2007 are outperforming in 2008.
The take-away? Recognize that there may be beaten-down value in the unloved areas of a stagnant economy. What's more, as powerful and as energetic as Resources ETFs have been, the possibility of "irrational commodity exuberance" requires your attention.
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