ETFs That Help You Sleep Better at Night
When the domestic markets give up 3% in a single day, a curious investor always wonders, "Did anything buck the trend?" Not this time... not a single significant sector.
Truthfully, today's ticker was so ugly, the only big winners were the short funds. If you had a position in ProFunds UltraShort Tech (REW), ProFunds UltraShort Financials (SKF) ... pretty much anything short ... you prospered.
Yet the short game is a dangerous one; it requires rapid fire profit-taking under highly volatile conditions. In other words, it's hardly a buy-n-holder's best investment. (A quick glance at the chart below shows exactly what can happen if one tried to hold a short position in financials throughout the summertime.)
Nevertheless, there are precious few winners on the long side of the portfolio. And for today, there were none... only safer places to hang on for dear life.
Those safety spots? The traditional havens of Utilities (XLU), Pharma (XPH) and Staples (XLP).
Imagine losing 1.25% in a day... and being grateful for the relative out-performance?! That's the case when your position(s) is down less than 1/2 the broader market.
Nevertheless, today represented more market overreaction than anticipation; that is, fear of a worsening economy is far greater than the probability. (Of course, fear and greed are what move the markets... so I am not dismissing the power of fear.)
Does the economy stink? Yep. Has most of that been priced into the market. Hard to say.
I will say this: The market won't be going straight down like it did in June/July. Recall that oil went to $150, the dollar was weak, and we had all of the same credit crisis housing woes circa 6/1-7/15.
In contrast, we're asking if oil-under-$100 per barrel is a good thing. The dollar is strengthening. The 2/3 component of the U.S. economy, the service side, expanded in August. It follows that we will probably see plenty of spectacular snap-backs and range-bound moves.
I still like many of the same ships that have helped keep my boat afloat. Medical Devices (IHI) and PowerShares Water Resources (PHO) remain part of my health care/utilities package.
Read more about Medical Devices (IHI) right here.
Disclosure: The author or his firm may hold positions in the ETFs, mutual funds and/or index funds mentioned above.
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