Conventional wisdom says to buy funds posting strong returns in top performing categories, suggests ...
These 3 ETFs Are Very Timely Buys
11/03/2011 8:15 am EST
While earnings for the third quarter have been solid, consumers aren’t feeling very confident, says Nicholas Vardy of The Alpha Investor Letter.
We are now firmly into the fourth quarter—the quarter in which global markets traditionally perform best. And what a quarter it has been.
Since bottoming on October 3 until a few days ago, global stock markets shot straight up. Earnings reports have been overall positive, even in the face of a slowdown in the global economy. The recent sharp drop confirmed, however, that the market is still vulnerable to negative news surrounding the resolution of the European debt crisis.
However, there are reasons to be bullish over the longer term, based on an interesting bit of information that I came across on sentimentrader.com.
The Conference Board’s preliminary survey of consumer confidence came out yesterday at 39.8, posting one of the worst results in the survey’s 40-plus-year history. US consumers last felt this lousy in March of 2009, right at the market’s bottom.
Ironically, that’s good news for stocks. One year after reporting a survey reading at or below 50%, the return on the S&P 500 was positive 100% of the time. Moreover, this remarkable pattern has occurred 18 times in the past.
The average return was 22.9%, with a maximum average decline of 4.1% during the year, as compared to a maximum gain of 25.6%. When consumers get this down, it’s been good news for stocks, without exception.
Based on our 50-day moving average rule, I am recommending that you re-enter several of the positions on your Watch List. These include:
- iShares JPMorgan $ Emerging Markets Bond (EMB)
- First Trust NYSE Arca Biotech Index (FBT)
- Market Vectors Russia ETF (RSX)
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