NEW YORK ( ETF Expert) --Investing in stock assets when the S&P 500 is hitting fresh highs can be as dangerous as driving on a yet-to-be-plowed stretch of highway. You may get to your destination without a hitch. Then again, you might spin out of control and crash.
At present, both the eurozone's ongoing recession and "Snowmageddon" on the East Coast are likely to have an adverse impact on U.S. economic growth. It follows that a blind allocation in a blizzard is ill-advised.
Traditionally, clean-up efforts have been beneficial to corporations like Home Depot (HD) and Lowe's (LOW). Reconstruction endeavors have also been positive for the homebuilders. In theory, you may even see a jolt to the automakers if enough cars are destroyed by this weekend's snow superstorm.
There's little reason to doubt that repairs and rebuilding will occur after the snowfall stops. On the other hand, homebuilders and automakers have already had a remarkable run. Indeed, it may be more sensible to pursue beneficiaries that have not pole-vaulted quite as high over the previous three to six months.For example, according to the Automobile Association of America (AAA), the price of retail gas has rocketed 30 cents in the last month alone. By way of comparison, natural gas prices have been tame. If one accepts the idea that a snowstorm of the projected magnitude is likely to push heating costs higher, and if one looks at residential heating oil prices outpacing retail gasoline over the previous eight winters, it is reasonable to anticipate bigger profits for the natural gas producers. Enter First Trust Natural Gas (FCG). Whereas the Dow and the S&P 500 have risen way above the highs of September 2012, FCG is still recovering. Only recently has this exchange-traded tracker of natural gas companies climbed back above a long-term 200-day trendline. Another motif that may have traction is the increased usage of the Internet and social media during superstorms. It happened during Hurricane Sandy in October. Whether one employs "hashtags" on Twitter, or seeks guidance at Facebook (FB), LinkedIn (LNKD) or Google (GOOG), there is plenty of reason to expect larger-than-life traffic volume. Online retailers also stand to gain. Unfortunately, Global X Social Media (SOCL) has already experienced a super-sized jump off its November lows. It also has an enormous 13% weight in Facebook, which might increase volatility in your portfolio. I would prefer First Trust Technology AlphaDex Fund (FXL), which boasts a wider distribution across tech companies as well as a stock selection methodology based largely upon fundamental value. Finally, a snowstorm, even one as severe as the one this weekend in the East, may not be as threatening to the insurance industry as hurricanes or earthquakes. Hurricane Sandy did little to deter people from betting heavily on financial company gains. On the flip side, the frequency of weather-related events may undermine the ability for insurance companies to accurately underwrite. If they cannot accurately assess probability of loss, insurers may experience smaller profits... either due to an unwillingness to write policies or due to a substantial uptick in claims. If you are an aggressive trader, you might consider shorting SPDR KBW Insurance (KIE). The fund is severely overbought as evidenced by Relative Strength Index (RSI) readings consistently over 70; the ETF itself is more than 15.3% above a 200-day moving average. Follow @ETFexpert This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- 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 + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV