Here are three reasons why next year will be a time for conservative optimism among investors:
1. If the S&P 500 finishes the year above 2,034, it will lock in the third consecutive year of double-digit gains. Since inception of the S&P 500 84 years ago, that's happened only three times -- and the subsequent year was up double-digits every time.
2. 2015 is a pre-election year, which is the best performing year of the presidential election cycle. The last loss in a pre-election year dates back to 1939.
3. Based on duration and performance, some consider this bull market a "dead man walking." While certain indicators measuring internal market strength show a degree of weakening, we are not yet seeing the kind of "red flag behavior" typical of a major market top.
So it's a great time to invest in an ETF poised to take advantage of the coming market gains. Here are 10 to consider:
The SPDR S&P 500 ETF is the oldest and largest ETF in the world. Inexpensive and broad exposure to the U.S. stock market make it a solid foundation for any stock portfolio.
The iShares S&P 100 ETF invests in the biggest companies of the S&P 500 (called mega caps). Historically, large company stocks tend to shine in the later stages of a bull market. This bull will turn seven in 2015, and has already lasted longer than the average bull market.
Preferred stocks offer higher yields as they blend the characteristics of bonds and stocks. The iShares U.S. Preferred Stock ETF offers exposure to this unique market. Its 12.72% 1-year gain includes a juicy 6.95% dividend yield.
Gold prices took a beating in 2014 and are likely to rebound in 2015. The iShares Gold Trust is a lower-priced and competent alternative to the popular SPDR Gold Shares (0.25% compared to 0.40% expense ratio).
Unlike gold ETFs, which aim to replicate the price of gold, the Market Vectors Gold Miners ETF invests in the shares of gold mining companies. This approach tends to magnify returns. The Market Vectors Gold Miners ETF is essentially a slightly leveraged bet on rising gold.
The iShares Silver ETF lost 69.72% from its 2011 peak to its 2014 low. Picking up this ETF at such depressed levels is a lower risk version of 'catching a falling knife.' Based on its bullish November reversal, silver should trend higher in 2015.
The U.S. dollar soared more than 10% since July and is due for a breather. A sizeable U.S. dollar correction in the first quarter should offer an attractive entry point. The PowerShares US Dollar Bullish ETF becomes attractive around 22.
Speculators just moved to a new all-time record short position against the peso. The peso and Mexican stocks were this year's zero and may be next year's hero. Adding the iShares MSCI Mexico ETF will spice up portfolio performance.
The Energy Select Sector SPDR ETF is deeply oversold, with 97% of its component trading below their 50-day moving average. Since lower prices are still possible, it's best to leg into XLE incrementally (dollar cost averaging).
The iPath DJ-UBS Coffee ETN doubles as an opportunity and reminder that investors should always be alert. Coffee cycles are turning higher in January, which should give this ETN a lift and caffeinate portfolios. Support around 30 is a good entry level.
This article is commentary by an independent contributor. At the time of publication, the author held positions in GLD and FXE.