Does First In, First Out Recession Sentiment Benefit U.S. ETFs?

The idea that the United States markets and exchange traded funds (ETFs) will come out of the recession first to see all the gains it entails but the benefits may not be favorable.

Many analysts believe the U.S. markets will witness investment gains from a “first-in-first-out” relation with the current recession, writes Gary Gordon for ETF Expert. But U.S. dollar is weakening due to historic rate cutting, copious bailouts, and increased liquidity.

A number of regional ETFs including emerging markets and developed markets climbed above their short-term 50-day moving averages, but the United States is the notable exception. Such ETFs include:

• iShares FTSE/Xinhua China 25 Index (FXI): down 44.4% year-to-date, 50-day avg. up 9.8%

• iShares MSCI Emerging Markets Index (EEM): down 47.3% year-to-date, 50-day avg. up 4.6%

• iShares MSCI Japan Index (EWJ): down 28% year-to-date, 50-day avg. up 5.1%

• S&P 500 SPDR Trust (SPY): down 37.2% year-to-date, 50-day avg. down 1.8%

The U.S. investment markets do not reflect the fact that the country could be first in coming out of the recession. U.S. ETFs, such as the S&P 500 SPDR Trust, have better year-to-date performances, with the exception of Japan, compared to other ETFs which show that the U.S. economy will fall but not as hard as those of the rest of the world.