While a short trading week will mean lower liquidity and higher volatility for ETF investors, there are still plenty of funds to watch while surfing the Web for last-minute gift ideas.
Retail data, housing starts, orders for durable goods and a GDP revision will help to keep this short week interesting. Here are five ETFs to follow:
First Trust Dow Jones Internet Index
Shoppers are waiting until the last minute, suggests a recent survey from the National Retail Foundation. After the second week of December, consumers admitted to having just 46.7% of their holiday shopping done - the lowest level of completion since 2004. Approximately 20% of
noted that they hadn't even started yet.
Weekly measures of retail activity are important during the holiday season, so Tuesday's retail data will be an important indication of consumer health. Since so many shoppers have admitted putting off purchases to the last minute, data for the week ended Dec. 19 should reflect a last-minute spending binge.
More than ever, shoppers are using the Internet
. As the days to Christmas tick closer, FDN's components will see increased activity. Consumers will flock to top FDN holdings like
for gifts and hopefully checking
for plane tickets home.
FDN, which targets companies that generate at least 50% their annual sales/revenue from the Internet, could benefit from procrastinating consumers. (FDN is a holding in my
ETF Action Portfolio
SPDR Gold Shares
have been a popular safehaven for investors as the price of this precious metal trends upwards.
There has been another pattern for funds like GLD, however, as the price of the ETFs have waxed and waned with some regularity over the past few months. After spiking in mid-December, GLD has sold off. Interestingly, GLD also sold off at the end of September, October and November.
With rates hovering near zero and uncertainty plaguing the marketplace, ETFs like GLD continue to look like an attractive investment into 2010.
If gold's monthly cycle continues, this week may be the best moment to pick up shares of GLD before investors ring in the New Year.
iShares Dow Jones U.S. Consumer Goods Sector Index Fund
On Wednesday, when the final December reading of the Reuters/University of Michigan Consumer Index is absorbed by the marketplace, the news could have an impact on consumer goods ETFs like IYK,
the SPDR Consumer Staples Select Sector SPDR Fund
Vanguard Consumer Staples ETF
All three of these funds are top heavy - loaded with large cap firms like
Philip Morris International
. While the sentiment of American consumers will certainly impact these U.S. based companies, components of these consumer ETFs generate a lot of their revenue abroad.
A number of factors will be weighing on these consumer goods ETFs this week. In addition to the final reading of the Consumer Sentiment Index, a volatile dollar could impact the companies that make up these ETF funds.
It will be interesting to see how a fluctuating dollar and an expected positive outlook for Consumer Sentiment impact consumer goods ETFs.
iShares Dow Jones US Home Construction
Housing starts have been rebounding, and ITB has been bouncing back ahead of a raft of housing data out this week. During the three month period ending Dec. 17, ITB dropped 13.57%. During the one week period ending Dec. 17, however, ITB rose 3.92%.
If new and existing home sales continue to firm up, ITB could erase even more of its three-month losses in the week ahead.
Even though the tax credit for homebuyers has been extended, many deals are currently in the works. Data this month will likely still reflect the urgency that many homebuyers felt before the extension.
Over the next six months, the housing market as a whole, along with ITB will continue to face challenges like unemployment. This week however, if housing data is positive, ITB could jump in the short term.
iShares Dow Jones Transportation Average
IYT stands to benefit from data for durable goods, set to be released on Thursday. While orders for civilian aircraft will likely be lower, the increased sale of motor vehicles, and the subsequent effort to replenish those inventories, could help to boost the companies that comprise IYT.
Airlines make up just 7% of this motor vehicle-heavy ETF, which is up nearly 20% year to date.
Much of the recent gains can be attributed to Warren Buffett's acquisition of IYT's top component,
Burlington Northern Santa Fe
. The $44 billion deal has attracted investor interest railroads, which make up more than 30% of IYT.
Since many of Wall Street's biggest players will be on vacation this week, ETF investors should trade strategically, with an eye towards the most active funds. Investors with short term ETF positions should double-check their exposure before 1 p.m. on Thursday. When U.S. markets close after a half day on Christmas Eve, investors will have to wait until Monday, while the rest of the world trades through the end of the week.
At the time of publication, Dion was long FDN and IYK.
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.