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ETFs Standing Up to Selling Pressure


NEW YORK ( ETF Expert) -- Recently, I talked about reducing risk by leaning toward revenue beaters .

Today, with a meager 37% of corporations surpassing expected sales targets, investors appear nervous about the possibility that companies will lose their footing on "Revenue Mountain."

Disappointing earnings reports, year-over-year revenue declines and uninspiring growth projections are not the only reasons for the selling pressure, however. President Obama appeared to be a lock in September. Now, many wonder about the prospect of county-by-county recounts in Ohio during the first few weeks of November.

And that's not all.

Spain's borrowing costs jumped back into fretful territory as ratings agencies once again discussed downgrades. Speculation about Chairman Ben Bernanke exiting the Federal Reserve regardless of who wins the presidency made the rounds. Most importantly, there has been precious little evidence that fiscal cliff fears will be resolved in a bipartisan, "cool heads will prevail" manner.

Interestingly enough, though, the three ETF categories I recently highlighted for standing tall in the face of fiscal cliff concerns demonstrated relative safety on the 240-point Dow Industrials sell-off on Oct. 23.

Those categories included: (a) assets with historically wide spreads with comparable treasuries, (b) assets that offer positive real returns after inflation and (c) Asia-Pacific ETFs that tap into a stabilizing economic situation in and around the region.

Here are some of those relatively safe ETFs and their percentage rise or decline on Oct. 23.

  • Vanguard Intermediate Corporate (VCIT), 0.2%
  • Market Vectors Latin America Bond (BONO), 0.1%
  • iShares S&P Preferred (PFF), -0.1%
  • SPDR Barclay High Yield Bond (JNK), -0.2%
  • PowerShares Emerging Market Sovereign (PCY), -0.3%
  • iShares MSCI New Zealand (ENZL), -0.7%
  • iShares MSCI Hong Kong (EWH), -0.8%
  • iShares MSCI Philippines (EPHE), -0.9%
  • First Trust Dividend Leaders (FDL), -1.1%

By comparison the S&P 500 was off 1.4% while the Dow Jones Industrial Average was down 1.8%.

The above-mentioned ETFs -- and the three categories described earlier -- provide a combination of income, relative safety and opportunistic growth. In truth, circumstances aren't likely to change enough in the near term to warrant additional risk taking.

Some are predicting that disaster is about to unfold. Perhaps. Yet, you don't want to become a panicky seller, nor do you want to listen to the doomsayers who have been whistling the same monotonous tune throughout the year. (For that matter... gloom-and-doomers have predicted the demise of market-based securities in every month and in every year in the new century!)

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