Should You Own ETFs In A "Stock Pickers Market"

Most Wall Street participants believe 2019 will be a “stock pickers” year; So how will that affect Exchange Traded Fund investors?

Well first off, what is a “Stock Pickers” market or year? That is a market in which to make a decent return; investors will need to pick individual stocks, not just buy the market as a whole or an index such as the S&P 500 or Dow Jones. At this point, most Wall Street analysts believe the major market indexes will end the higher just slightly higher. In mid-February, Goldman Sachs analyst posted a note indicating they think the S&P 500 will only climb to 3,000 by the end of the year, but the next few months could be flat.

Vanguard went a little further and said it believes the market will only return roughly 5% median annualized return over the next 10 years. Vanguard’s opinion paints an even worse picture than Goldman’s and hints at the idea that investors will need to be “stock pickers” for the next decade if they want to see returns greater than 5% annualized.

So, the experts are telling us that investors need to cherry pick individual stocks if they want to make a real-return greater than a few percent over the next year or maybe more. But what if they don’t know how to find and pick market-beating stocks, they need not worry because that is why actively managed ETFs where created. Continue reading "Should You Own ETFs In A "Stock Pickers Market""

Best January In 32 Years! Is It A Sign Of How 2019 Plays Out?

After having the worst December in more than 87 years, the markets bounced back in January, gaining 7.9% in the month and the best January the market has experienced since 1987. This follows last January when the S&P 500 increased by 5.6%, which at the time was the best January the index had seen since 1997.

Historically when the market finishes January in the black, the market finishes higher for the year. Since 1928 when the market is up in January, it has finished the year higher 71% of the time. On a smaller timeframe say since 1950, when the market ends January higher, it has ended the year higher 85% of the time or 58 out of 68 times.

Now maybe your thinking to yourself that in 2018 the market was higher in January but ended the year in the red, down 6.2%. Well since 1980, we have not seen consecutive years in which the market end January higher, but finished the year in the red. Continue reading "Best January In 32 Years! Is It A Sign Of How 2019 Plays Out?"

Amazon's October Drop Hurting ETFs

Most recent data shows 246 different Exchange Traded Fund’s owned more than 24.7 million shares of Amazon.com (AMZN). But, the companies recent 20.9% decline in the month of October alone, (Amazon opened October trading at $2,021 per share and closed the month trading at $1,598 per share, or a 20.9% decline) has certainly had an effect on not only those 246 different ETFs and their investors, but also those investors whom may have directly purchased shares of the company. Furthermore, due to its market capitalization, it was a very heavily weighted stock in some large ETFs, which makes its recent decline even more painful.

Some of the hardest hit ETFs over the last month was the SPDR S&P 500 ETF Trust (SPY) because Amazon was its second, now third, largest holding and SPY was the single largest owner of Amazon stock. ProShares Online Retail ETF (ONLN) had 22% of its assets in Amazon as of late, while the Vanguard Consumer Discretionary ETF (VCR) and the Consumer Discretionary Select Sector SPDR Fund (XLY) both had more than 20% of their assets in Amazon.

Throughout the ETF world, there where eight different ETFs which had more than 10% of their assets in Amazon in recent weeks. Most were in the consumer discretionary sector, but a few internet focused ETFs such as the Invesco QQQ ETF (QQQ), and the First Trust Dow Jones Internet Index ETF (FDN) had more than 9% of their assets in Amazon. Continue reading "Amazon's October Drop Hurting ETFs"