ETF Round-Up: What’s Hot! What’s Not! And What To Stay Away From?
April 25, 2008

SAN DIEGO (ETFguide.com) - Range-bound, uninspired trading continues to plague the US stock market.

There is little traction from any specific sector. As a sector rallies, profits are taken. ETFs are a leading indicator for the broader market and as such they might be signaling trouble ahead.  

Best Performing Sectors / ETFs:

Sales of new homes plunged in March to the slowest pace in 16 ½ years, yet the best performers came mainly from the real estate and homebuilders sector.

The iShares Dow Jones US Home Construction ETF (Ticker: ITB), up 8.6% and StreetTRACKS Wilshire REIT ETF (Ticker: RWR), up 6.8% were followed by a 6.5% to 6.6% gains in the SPDRs Homebuilders ETF (Ticker: XHB), iShares Cohen & Steers Realty ETF (Ticker: ICF) and the Vanguard REIT ETF (Ticker: VNQ).

This rally came in the face of spiraling foreclosures and languishing housing prices. The median price of a new home in March compared to a year ago fell at the fastest clip in 38 years. The sustainability of this trend is questionable and is not likely to stick around for long.

Worst Performing Sectors / ETFs:

Interestingly, one of the worst performing ETFs came from the strongest performing sector. The iShares FTSE NAREIT Mortgage REIT (Ticker: REM) got hit hard, down 24.5%. REMs plunge can be attributed to a 23.5% holding in Annaly Capital Management (NLY) which corrected over 30%.

Healthcare:

Healthcare did not have its best month as the iShares Dow Jones Healthcare Providers (Ticker: IHF) and PowerShares Dynamic Healthcare Services (Ticker: PTJ) were down by 14.2% and 13.9%.

Perhaps the industry is concerned about the possibility of a Democratic president bent on universal health care.

Silver/Gold:

Even though a weak dollar and inflationary pressure make silver and precious metals an excellent hedge, silver retreated last month after hitting multi-decade highs. iShares Silver Trust (Ticker: SLV) and PowerShares Deutsche Bank Silver (Ticker: DBS) were off 13.4% and 13.6%.

Commodities:

Agriculture, as represented by the PowerShares Deutsche Bank Agriculture ETF (Ticker: DBA) and Market Vectors Agribusiness ETF (Ticker: MOO) was forced to take a time-out. The larger picture of spiraling food costs has not changed and supports continued bullishness. A correction however would not be out of character before the run continues.

What ever happened to China?

It’s gotten quiet around China, last years “darling of Wall Street”. The Shanghai index has corrected as much as 45% this year. The Claymore/AlphaShares China Small Cap ETF (Ticker: HAO) and Real Estate ETF (Ticker: TAO) have shed around 10% last month, in line with First Trust’s ISE Chindia ETF (Ticker: FNI).

The Beijing Olympics were intended to be a huge “coming-out-party” displaying all the wealth and opportunity China has to offer. However political unrest ( Tibet), economic and environmental issues are becoming more obstinate news headlines not exactly fueling the local economy.

But just when things started to look grim, the Chinese government announced to cut the stamp tax rate (tax on the purchase and sale of stock, reduced from 0.3% to 0.1%). This has no real fundamental effect but it signals the government’s willingness to support continued growth and helped the iShares FTSE/Xinhua ETF (Ticker: FXI) to a quick 10% gain for the week.

Finding pockets of strength:

Gas & energy prices are on everybody’s mind. In addition to conventional energy ETFs, think outside the box; think global, alternative energy sources. As the worldwide supply crunch continues ETFs like the Global Energy ETF (Ticker: GEX) and the Nuclear Power ETF (Ticker: NLR) provide diversified energy exposure at lower valuations with a disconnect to the current high oil prices. Alternative energy ETFs tend to be quite volatile, don't chase, wait for corrections.

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