NEW YORK (
) -- As investors prepare for the final trading days of 2009, health care reform, the retail sector and inflation will be on the minds of many. A shortened trading week will probably keep volume low, but these five exchange-traded funds are still worth watching:
iShares Dow Jones U.S. Healthcare Providers Index ETF
Health insurers have had the weekend to digest the massive reform facing their industry. An excise tax could cost the major insurers in IHF's underlying basket as much as $70 billion over 10 years. Top holdings in IHF include
As the health care reform legislation took shape, insurers initially traded controversial practices for promise of a new customer base. Now, as more details of the bill emerge, insurers are gritting their teeth and hoping to further shape the language of the reform, as well as initiatives that will take years to implement.
Although Wall Street's short-term gut reaction to the health care bill could result in a selloff, IHF could continue to recover over time as insurers figure out how to maneuver in the wake of the new legislation.
SPDR S&P Retail ETF
In the trading days following Christmas, both analysts and consumers will mull over retail sales. Retailers will try to rope in additional shoppers through post-holiday sales -- both online and in stores. XRT, one of the largest and most liquid retail ETFs, should react to retail efforts this week as top components like
continue to vie for customers.
Tuesday, the University of Michigan Consumer Sentiment Index numbers will give traders some insight into the minds of shoppers. While the many factors impacting retail make XRT's performance this week a difficult course to chart, in the wake of the holiday season, this is certainly a fund to watch.
iShares Barclays TIPS Bond ETF
In the last few days of 2009 trading, investors will be looking to position their portfolios for 2010. One increasingly talked-about concern is inflation, and more investors may be turning to TIP this week to gain inexpensive exposure to inflation-protected securities.
During the past month, analysts have made a case for both inflation and deflation. As investors calculate the costs of the new health care bill, however, the ranks of inflation hawks may increase.
TIP was one of the top net asset gainers in the ETF universe during 2009, and as long-term investors reexamine their asset allocation this week, this fund could stand out in terms of volume.
Claymore/NYSE Arca Airline ETF
Both last-minute holiday travel and a thwarted bombing will impact FAA, an ETF that tracks major airline firms. FAA counts airlines like
among its top components.
Domestic carriers, which have aggressively cut back on offerings of discounted fares, should see a boost in revenue following the 2009 holiday season. While the recession kept some of the usual travelers home, procrastinating consumers were dinged by high prices on last-minute tickets.
Traders will also be digesting news of an attempted attack on Northwest Airlines Flight 253 on Friday. Fellow passengers helped to subdue a man who was trying to detonate explosives on his legs, and the incident resulted in tightened security.
FAA has soared in 2009, and holiday fares may outweigh traveler concerns in short-term trading.
iShares MSCI Japan Index ETF
Scandal, consumer prices and a worsening economy could weigh down shares of EWJ in the upcoming days. As ETF investors in the U.S reflect on data released in Japan on Friday, EWJ is positioned to take a hit.
Japan's government released data Friday indicating consumer prices fell in November for the ninth month in a row. Japan's leaders are hoping to combat deflation and a weak economy with a proposed $1.015 trillion dollar budget, also released Friday.
In short-term trading, deflation could hit EWJ particularly hard. The top three sector allocations for this Japan ETF are consumer discretionary, industrials and financials.
-- Written by Don Dion in Williamstown, Mass.
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TheStreet ETF Action by Don Dion
At the time of publication, Dion owned iShares Dow Jones U.S. Healthcare Providers Index ETF and iShares Barclays TIPs Bond ETF.
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.