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TheStreet Open House

Three Trends That Favor Non-Cyclical ETFs in April

Stocks in this article: XLIGMFCARZDALHDSTMHMC

NEW YORK ( ETF Expert) -- Investors may be heartened to discover the Cyprus bailout is back on track. I am not sure how that will prevent Europeans in Italy and Spain from slowly moving their money out of beleaguered banks, but that is an issue for another day.

Right now, broad-based U.S. large-cap stocks are trading at record levels yet again. And as Barron's recently penned, "Why Worry, Be Bullish!"

After several decades in financial services, I find it ironic that pundits ever self-select into a bull or bear camp. Investing does not require predicting, it requires control. One needs to limit costs to increase his/her portfolio returns. One needs to eliminate the possibility of a big loss in any position. One needs to minimize the effect of his/her emotions on decision-making.

Granted, I may have an opinion or a combination of opinions whereby others might label my current stance. However, I do not think in terms of bear or bull. I think in terms of gathering information -- fundamental, technical, historical, economic, political, contrarian, anecdotal. I use that "intel" to decide what and when to purchase. Equally important, I have a plan with unemotional, mechanical tools (e.g., stops, hedges, trendlines, etc.) to determine exactly what and when to sell.

I continue to stick with consumer staples, pharmaceuticals, broad-based health care, telecom and a number of utilities -- the meat and bones behind a safer growth and income approach.

The fact that I continue to recommend holding cash to buy more low-risk, non-cyclical assets for the next 5% pullback probably places me in a camp of bashful bullishness. If that's the way others see me, so be it. That said, the evidence at the present moment does not support going boldly into cyclical favorites like technology, energy or industrials.

Here, then, are three trends that favor non-cyclical ETFs over their counterparts:

1. Manufacturing Slowdown is Damping the Industrial Sector

Nearly every week, the media inundate us with the Dow 30's latest record or the S&P 500's most recent conquest.

Beyond the price movement, however, actual economic data are less encouraging. For instance, the year-over-year growth rate for factory orders has slowed considerably over the last two years. Granted, the Federal Reserve uses weak economic info to justify its ongoing bond purchases.

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