This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

10 Troubled Spirits in Materials ETF World

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (ETF Expert) -- Month-over-month, most sector investments have provided investors with ample capital appreciation. Country ETFs with ties to technology, energy and infrastructure have all performed admirably.

Yet there are a variety of areas of weakness that cannot be disregarded as inconsequential. For instance, in my February commentary on underachievement in the transportation arena, I highlighted the concerns with the Dow Industrials Average hitting new highs at the same time that the DJ Transportation Average is heading in the opposite direction. And on my weekend podcast, I talked about the problematic history associated with small-caps severely lagging large-caps during a bull market run.

Follow TheStreet on Twitter and become a fan on Facebook.

A third area of trouble directly challenges the current consensus that economies like the U.S. and Germany will continue to “improve.” Companies engaged in the discovery and development of raw materials, as well as the countries tied to mining, forestry and chemical production, are seeing their corresponding ETFs pull back sharply.

In examining the month-over-month performance of 10 ETFs with the strongest one-year positive correlations to Vanguard Materials (VAW), there has been a decidedly negative tone.

Month-Over-Month Returns for ETFs With High POSITIVE Correlations to the Materials Sector
Approx %
iShares South Africa (EZA) 0.99%
PowerShares Pure Fundamental Small Growth (PXSG) 0.58%
Market Vectors Hard Asset Producers (HAP) 0.32%
iShares Australia (EWA) -0.68%
SPDR Select Sector Materials (XLB) -1.82%
iShares Russell MicroCap (IWC) -1.92%
iShares Global Materials (MXI) -2.67%
iShares DJ Materials (IYM) -3.51%
First Trust Global Copper (CU) -4.51%
Market Vectors Steel (SLX) -5.84%
S&P 500 SPDR Trust (SPY) 3.07%




Perhaps a stock market correction isn’t imminent. Nevertheless, one of the least correlated exchange-traded investments to the materials sector is the iPath S&P 500 VIX Volatility Mid-Term Futures (VXZ). Not only is it 4.63% in the same month-over-month period, but VXZ is successfully mitigating “long” cyclical stock risk in portfolios. (Note: In my Feb. 8 commentary, I explained the benefits of a temporary portfolio hedge with VXZ.)

More importantly, ETF investors who intend to ride out any volatility in 2012 will need to be cognizant of their diversification (or lack thereof). Many who may feel empowered by holding Australia (EWA), may not be aware of its monumental dependence on raw material demand from China. It follows that China’s announcement on Monday that it is targeting its slowest GDP growth since 2004 was bound to have an adverse impact on Australian equities.

Similarly, the smallest upstarts in iShares MicroCap (IWC) as well as the rapid-fire growers in PowerShares Small Growth (PXSG) also share high positive correlations with the materials segment. Performance here has also been lackluster. Again, one may need to revisit his/her holdings to make sure that one’s portfolio is not overexposed to the “accelerating” economic growth story.

Disclosure Statement: ETF Expert is a website that makes the world of ETFs easier to understand. Gary Gordon, Pacific Park Financial and/or its clients may hold positions in ETFs, mutual funds and investment assets mentioned. The commentary does not constitute individualized investment advice. The opinions offered are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial or its subsidiaries for advertising at the ETF Expert website. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert at the site.

Gary Gordon reads:

Real Clear Markets
Jeff Miller
indexuniverse
Charles Kirk
On Twitter, Gary Gordon follows:

Jonathan Hoenig
Doug Kass
Hard Assets Investor

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,943.81 +28.74 0.17%
S&P 500 1,967.57 +2.89 0.15%
NASDAQ 4,415.49 +19.2860 0.44%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs