NEW YORK ( ETF Expert) -- After nearly four years, retail investors have begun to exit low-yielding investment grade bonds for the perceived potential of stocks.
This "rotation" of money flow into equity funds is putting pressure on fund managers to keep pace with the broader benchmarks. In other words, if they hold back cash in the hopes of a better buying opportunity, the broader S&P 500 may run away from them.
So the markets move higher on good news. They move lower on bad news in the morning, yet quickly recover in the afternoon as institutional dollars pursue "bargains" of 0.5% over more substantive price pullbacks.
In truth, complacency hasn't taken over just yet. The percentage of S&P 100 stocks over a 200-day trendline is roughly at 80%. Over the last three years, complacency has more commonly been associated with 85% to 90%. The premier contrarian indicator, the equity put-call ratio, has yet to demonstrate a dearth of short-sellers (0.35). In essence, there may still be room to run.That said, I already have plenty of broad market exposure. It is protected with stop-limit loss orders. My money management clients are unlikely to benefit from chasing. The answer in my silver-and-gold-lined playbook is to pursue a low-cost ETF that is less volatile than the S&P 500, has more yield than both the S&P 500 as well as an intermediate-term investment grade bond benchmark, is less correlated to the S&P 500 than most sectors of the economy and presents compelling potential for capital appreciation. That may be a tall order. Then again, I think that Vanguard Telecom (VOX) fits the description nicely. (I recently talked about my plans for telecom, and other 2013 portfolio positions, in this
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