ETF Investing in 2009
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Hi Toolbox Fans,
Last year was an interesting year in many ways and 2010 promises more of the same. Many forces at work in an uncertain global economy should keep us all guessing for some time to come.
Here is a look at where the money was made in 2009.
World markets…
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The ETFs above represent the various countries and as you can see the USA finished fourth from the bottom of the list. Given the current market conditions I would look for more under performance from the US markets in 2010.
The US Indices were all higher but clearly the NASDAQ led the way.
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The QQQQ finished the year with a 53.83% gain followed by the Mid-Cap 400 MDY at 35.59%. The IWM representing the Russel 2000 came in with a YTD return of 26.81% followed by the VTI, Vanguard Total Market with 25.99% for the year. The TWM, Wilshire 5000 Index finished with 25.42% followed by the S&P500 SPY with 23.49% and the DOW, DIA at 18.91%.
Below is a chart on the YTD performance of the DOW 30. American Express, Microsoft and IBM topped the charts while Exxon Mobile, GE and Walamrt bring up the rear.
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If you like to trade commodities and currencies take a look at this…
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Clearly Coal was the BIG winner nobody was talking about. Closing the year up 142.58%! XME, the mining spider ETF came in second with 85.98% followed by silver at 47.68%, gold miners GDX at 36.39%, gold GLD 24.03%, oil USO at 18.67% and a basket of commodities in DBC at 16.19%.
Personally I think commodities are the place to be and I am looking forward to inflation in things you need and deflation in things you don’t.
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The currency markets will continue to be a global force with an effect on all asset classes. Are the best days of the dollar behind us? Are there no limits to how much money can be printed up out of thin air?
It seems our Fed Chairman and other central bankers of the world are determined to find out and we have a congress that is hell bent on ways to help them spend the money.
This will probably end badly… Stay Tuned for more as the slow motion train wreck continues.
Below is a chart of all indices and market sectors for 2009 so you can clearly see who was leading this market higher and which sectors were the dogs. It looks like it was a pretty good year for the market as a whole with the possible exception of Biotech.
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As you can see 2009 was a pretty good year in the stock market once we got past the lows of March. The NASDAQ 100 index is up some 80% from the bottom and the S%P is up about 64.8%. The Dow Jones Index is up about 59.3% and many investors had an opportunity to recover some of the losses from the 2008 meltdown. Sadly I suspect that most mom & pop investors were… and still are on the sidelines.
Are we out of the woods yet?
Not exactly, good jobs are scarce and we have financial and political leaders still trying to re-inflate a popped bubble rather than just taking their economic medicine and establishing a real productive base from which to build.
The easy money has been made in this rally and going forward investors will need to be selective while traders will need to keep an eye out for the trend to change direction.
Finally, here is a look at Index ETFs and their leveraged and inverse counterparts.
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DDM, Double Long, DIA is the Index, DOG inverse, DXD Double Short.
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SSO Double Long, SPY the Index, SH Inverse, SDS Double Short
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QLD Double Long, QQQQ the Index, PSQ Inverse, QIL Double Short
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UWM Double Long, IWM the Index, RWM Inverse, TWM Double short.
The Index ETFs along with their inverse and leveraged counterparts make great trading vehicles, but not the greatest long term investments.
Take the QQQQ for example. The Nasdaq 100 index finished the year with a 53% gain, but the inverse ETF PSQ was only down 40%. The Double Long QLD was up 121% but the double short was only down 66%… Why is that?
There is a “churn” built in and the longer you hold leveraged ETFs, the more effect it will have on your performance. We suggest against it.
Make no mistake. There will be fortunes made and lost in 2010 and we want all of you to be on the right side of the trade. Let us know what you need. We will be glad to help.
All of these charts are made from the real-time ETF Dashboard in the Research Lab and are available every trading day.
Wishing you all a happy, prosperous and free new year.
Sincerely
Doug @ Investing Systems
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