NEW YORK (
) -- Don Dion posts his current insights on the stock, bond, commodity and currency markets in his
blog, anticipating which ETFs will be in play next.
In the following three blogs from the past week, Don commented on transport ETFs, retail ETFs and real estate ETFs.
Transport ETFs Likely to Keep Moving
Posted 4/15/2010 9:55 AM EDT
The transports sector is highly cyclical, and ETF investors have seen a variety of results from this area of the market.
Claymore/Delta Global Shipping Index ETF
, to which I gave a "
" earlier this month, is up nearly 24% year to date. As consumer confidence rises and retail spending increases, the container ships -- which make up a good chuck of the fleet represented by SEA -- have left idle ports. Continued demand for steel and oil, delivered by bulkers and tankers, has fleets busy delivering goods to emerging-market countries.
Claymore/NYSE Arca Global Airline ETF
has also surged in the last few months, flying nearly 22% year to date. Top FAA components such as
Delta Air Lines
, are seeing an uptick in traveling as the economy recovers.
Perhaps the most interesting transport ETF that investors will want to watch in the next few days, however, is the
iShares Dow Jones Transportation Average ETF
. Included among IYT's top components are
United Parcel Service
J.B. Hunt Transport Services
, all of which reported better-than-expected earnings this week.
CSX delivered first-quarter results on Tuesday, reporting a profit of $306 million. Increased revenue was attributed to a continuing economic recovery, which has spurred an increase in industrial demand. Coal, which is still a big chunk of CSX's business, is still lagging, but the company traded higher as investors digested the report.
Both UPS and J.B. Hunt reported results yesterday, beating analyst expectations. Both firms noted improved operating margins and higher revenue across all of the companies' various business segments. UPS and JBHT make up 7.90% and 4.62% of IYT's underlying portfolio respectively, helping to push IYT higher 1.88% during trading yesterday.
An improving economy seems to be helping to push transportation up across the board, but investors can still seek out ways to maximize their returns. As of yesterday's close, IYT had advanced just 13.91% year to date -- significantly lower than the returns for both SEA and FAA. With the latest round of earnings, it seems possible that IYT could made up some ground, so now's a good time for investors to get aboard.
Retail ETF Remains a Smart Bet, for Now
Posted 4/15/2010 11:15 AM EDT
Consumer confidence is up and consumer debt is down. At the same time, joblessness remains relatively high. Is the recovery in retail and economy sustainable?
In the short term, I believe consumer confidence and retail spending will continue to push the
SPDR S&P Retail ETF
higher. The job situation remains difficult, and the lower consumer-debt numbers suggest Americans are spending more prudently. They may not be charging big-ticket items, but the improving economy may inspire them to get out and about, which should continue to propel retail spending in the short term.
Much of the broader recovery still hinges on emerging-market demand. This trend seemed obvious as I read the
results and noted that the company named China as a "critical market" for the brand's success.
Improvements in transports, which I cited in my
last post, also depend on continued emerging-market demand.
In the short term, this trend seems sustainable. This morning, China said its economy grew 11.9% in the first quarter, from a year earlier. Over time, however, Beijing will likely adopt measures to keep its economy from overheating.
Investors will continue to be bombarded by reports and data today, but it is important to keep an eye on the strength of consumer spending in both the U.S. and abroad. In the short term, I believe that the best way to capture consumer optimism in the U.S is with XRT. U.S. investors can also continue to capture the growth of consumer spending in China with the
Claymore/AlphaShares China Small Cap
These trends may not be sustainable, but they're sure hard to fight short term.
ETFs Point to Real-Estate Turnaround
Posted 4/14/2010 3:15 PM EDT
After reading Jim Cramer's
earlier post , "Speaking from Experience on the REITs," I was inspired to follow up with a quick blog -- from the ETF perspective -- on what's going on in the real-estate industry.
As Jim mentioned, it's hard to be positive on real estate, reading all the stories in media. Everything's always getting darker and darker. Yet, the real-estate ETFs tell us otherwise.
I can't claim brilliance in this sector. The two funds I hold -- the
iShares Dow Jones US Real Estate ETF
iShares Cohen & Steers Realty Majors ETF
-- are more a tribute to my broader philosophy of diversified investing than to any specific insight into the sector.
There's something to be said for diversified investing this past year. This time last spring, it was like pulling teeth getting clients to invest in equities again. It has been doubly hard defending the idea of real estate as part of a well-rounded portfolio.
The latest financial crisis was unique in its breadth. Everything seemed to be in freefall, and my well-worn theories on keeping a well-balanced model looked almost obsolete. On the flip side, however, as the economy starts to blow by expectations, real estate has become a solid holding again. IYR and ICF are up 15.72% and 16.75%, respectively, year to date.
Even if you've missed the first leg of the real-estate rally, I urge you to consider adding one of these low-cost ways to gain real-estate exposure. Both funds are liquid, so they're not hard to exit.
-- Written by Don Dion in Williamstown, Mass.
At the time of publication, Dion owned IYR and ICF.
Don Dion is president and founder of
, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.
Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.