NEW YORK ( ETF Expert) -- Is the current chairman of the Federal Reserve a genius, a knucklehead or a mere mortal?
In late May, Ben Bernanke appeared to communicate that our central bank would soon be slowing down its bond purchasing program. Rate-sensitive assets from U.S. Treasury bonds to real estate investment trusts experienced a blood-letting that hardly seemed therapeutic to market participants. The carnage to foreign stocks and bonds was even more severe.
Now, in an apparent about-face, the chairman is emphasizing the Fed's "highly accommodative" stance through an ultra-low rate policy. Presto... stocks and bonds from China to Europe to the Americas rocketed higher.
Many financial professionals recall how previous Federal Reserve Chairman Alan Greenspan had attained deity status by the mid-1990s. Market watchers had credited him with orchestrating an incredible boom in the American economy as well as decades of success for securities.However, criticism with regard to the dot-come disaster (e.g., "He raised rates too rapidly") and the housing collapse (e.g., "He raised rates too slowly", "He raised rates too high", etc.) changed public perception; that is, Mr. Greenspan may have been human after all. Did Greenspan receive too much of the blame? Too much of the credit? Yes and yes. On the other hand, Bernanke's guidance has exerted far more influence on global assets than his predecessor's guidance ever had. What's more, even as U.S. stock power their way to record highs, it is too early to tell whether buying bonds to suppress interest rates is beneficial or detrimental to the U.S. economy. (Can you know if the patient has been cured if the patient still requires an enormous amount of medicine?) The global investing community currently believes that the Federal Reserve is less likely to taper its debt buying this year. All S&P 500 sectors rallied on this belief; some more than others. Here are the one-day, turbo-charged results for both the market-cap weighted Select Sector SPDR ETFs as well as the sector ETFs in the Guggenheim Equal Weight series:
|SPDR Select Sector ETFs||1-Day %|
|Select Sector SPDR Materials (XLB)||1.7%|
|Select Sector SPDR Technology (XLK)||1.7%|
|Select Sector SPDR Industrials (XLI)||1.7%|
|Select Sector SPDR Utilities (XLU)||1.6%|
|Select Sector SPDR Consumer Staples (XLP)||1.6%|
|Select Sector SPDR Consumer Discretionary (XLY)||1.4%|
|Select Sector SPDR Healthcare (XLV)||1.3%|
|Select Sector SPDR Financials (XLF)||0.9%|
|Select Sector SPDR Energy (XLE)||0.8%|
|Guggenheim S&P 500 Sectors Equal Weight||1-Day %|
|Guggenheim S&P Equal Weight Materials (RTM)||2.3%|
|Guggenheim S&P Equal Weight Technology (RYT)||2.0%|
|Guggenheim S&P Equal Weight Industrials (RGI)||1.8%|
|Guggenheim S&P Equal Weight Utilities (RYU)||1.7%|
|Guggenheim S&P Equal Weight Consumer Staples (RHS)||1.7%|
|Guggenheim S&P Equal Weight Health Care (RYH)||1.4%|
|Guggenheim S&P Equal Weight Con Discretionary (RCD)||1.2%|
|Guggenheim S&P Equal Weight Financials (RYF)||0.7%|
|Guggenheim S&P Equal Weight Energy (RYE)||0.5%|