With so much uncertainty around -- the upcoming presidential election, a recent 400-point drop in the DJIA and a recent huge jump in corn prices among many examples -- this quarterly review is dedicated to helping you update your ETF portfolio in case of rainy days ahead.
Here are some high-flying investments benefiting from new political and energy market trends.
1) Buy Coal
The recent surge in coal prices is just the beginning of a longer-term cycle uptrend for coal. The global use of coal is rising while coal stockpiles are falling pushing coal prices higher.
As I suggested last week
, the fastest way to invest in this price action is through the
Market Vectors Coal ETF
, a 39-stock fund that invests in the coal industry worldwide.
2) Short Financials
In every economic cycle downturn, major financial institutions experience significant credit losses and have a capital shortage. Earlier this week,
was able to raise $6 billion in equity -- but the markets are not always so kind, especially with smaller firms.
The primary ETF for shorting the U.S. financial sector is
ProShares Ultra Short Financials
. (Keep in mind, the "Ultra" in the name means it's leveraged, which adds risk.)
If you think more write-offs are coming or that
American International Group
and other financials stocks are headed lower, this is the ETF for you.
3) Maintain Material Investments
The best-performing holdings in the portfolio last quarter were
ProShares Ultra Basic Materials
S&P Metals and Mining ETF
. These were up 27% for the three-month period. This performance was driven by rising prices for steel and coal. Expect this to continue and drive materials and mining stocks higher over the coming quarters.
My favorite steel stock remains
, which is a top-10 holding in
Market Vectors Steel ETF
, which did so well last quarter. In addition to being a cyclical materials beneficiary, Gerdau will benefit from last month's creation of the Union of South America Nations.
4) Explore the Oil Patch
Three ETFs make the grade here.
The first is
PowerShares Dynamic Oil & Gas Services Portfolio
, which holds oil-service stocks such as
and my favorite drill-rig stock,
. The market has never looked so good for oil-service companies. The second is the
S&P Oil and Gas Exploration and Production ETF
. The top two holdings are two shale oil stocks,
The third is the
ProShares Oil and Gas
, which is a concentrated play on traditional big-oil stocks.
5) Reconsider Russia
Russia's new President Medvedev plans to turn Moscow into a global financial center and to make the ruble a leading regional reserve currency.
are among the top five holdings in
Market Vectors TR Russia ETF
. Over the last year this ETF has gained 56%, but looks to have still more upside potential with 36% of the portfolio in oil and gas, and another 26% of its investments in iron and steel products.
6) Short China in the Short-Term
Be careful with this one.
If you are sour on emerging markets, try
ProShares UltraShort FTSE/Xinhua China 25
. The recent natural disasters and expectations for slowing growth might make this a good time to place a short-term bet before the Olympics. Slower growth may be good longer-term for the economy but is likely to hurt stock investors expecting fast money near-term.
Things are not so rosy out East in general. The
DB X-TRACKERS FTSE VIETNAM ETF
dropped 30% last month, posting a 58% loss since its inception in February. Inflation fears, a currency crisis and IPO delays are scaring foreign investors from this once-buoyant market.
As the world looks to cut its reliance on oil and coal and curb carbon dioxide emissions, some of the best-performing stocks of the next 12 to 18 months may be in the global nuclear sector.
Market Vectors Nuclear Fund
is a global fund that invests in the nuclear energy business. Only 29% of this fund is in U.S. stocks, with another 26% from Japan and 24% from Canada. Three leading investments represent 30% of the fund:
Electricite de France
British Energy Group
Mitsubishi Heavy Industries
The regulatory environment for nuclear power is improving. China is planning to build 30 new nuclear reactors over the next 13 years. Last month, Italy lifted a 20-year moratorium on nuclear-power stations. Even in the U.S., several state legislatures are considering bills to lift the ban on nuclear power.
But don't expect a wave of new plants opening in the US. The first new U.S. reactors are not scheduled to go online until sometime in 2015. In the meantime,
-- one of the nuclear plant applicants -- is considering other avenues to grow. It bid for post-bankruptcy
, which has attractive geothermal operations and newer plants, but the offer was turned away as too low.
Among the winners will be utilities that already have nuclear power plants online such as
, the largest operator of nuclear plants in the US. The world's largest publicly-traded uranium producer, the Canadian firm
, is also well-positioned for the increased future demand and acquisition activity.
This also implies that the losers will be those utilities that are still dependent on coal and oil, and those that have not locked up uranium supplies.
Among all the investment ideas presented it is clear that the smart money is going into commodities, currencies and country funds, or staying in cash. ETFs are an easy way to invest in these new opportunities.
Rudy Martin is the former director of research for TheStreet.com Ratings. Earlier he worked 25 years in investment research and management positions with Fidelity Investments, Lincoln National, Dean Witter Reynolds and Transamerica Investments. He began his career as a securities investment analyst at Duff and Phelps where he published equity and fixed income securities investment recommendations. Martin holds a master's degree in finance from Kellogg Northwestern University and is also a Chartered Life Underwriter.