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ETF Diversification Reclaims Its Mojo

NEW YORK (ETF Expert) -- Glum economic data derailed U.S. stocks in January. A mammoth "miss" for manufacturing activity, an unsettling decline in mortgage applications as well as an appalling "net-new-jobs" number were some of the high-profile culprits. At long last, it seemed as if the market might treat bad news as a reason to recoil.

Here in February, though, disappointing data have only strengthened the resolve of buy-the-dip investors. Job growth deceleration from a 3-month rolling average of 190,000 down to 150,000 sent U.S. stocks surging a week ago. Federal Reserve Chairwoman Janet Yellen ignited additional stock sparks by emphasizing that tapering of the central bank's electronic money creation is not on a pre-set course.

Meanwhile, the sharp drop in retail sales in December and January sent benchmarks higher as well; presumably, economic weakness implies the Federal Reserve may have to maintain or even raise the dollar amount of its emergency level bond-buying beyond 2014.

Are U.S. stocks still the place to be, then? Yes and no. The popular question assumes that fund flow will concentrate in U.S. equities at the expense of other asset classes. At the same time, "risk-off" assets like iShares 20+ Year Treasury (TLT), SPDR Gold Trust (GLD) and CurrencyShares Japanese Yen Trust (FXY) are some of 2014's best performers.

At the very least, investors who diversify across a wide-range of asset classes may finally enjoy the fruits of their diversification labor. In 2013, diversifying left many ETF enthusiasts with a bad case of performance envy, as U.S. stocks reigned supreme.

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