Prices Vex Economy and Help ETFs; Forecasts Are That Next Year May Be Better

May 19th at 10:00am by Tom Lydon

Dollar_signsAnother week, another round of rising prices that may affect exchange traded funds (ETFs) across the board.

It’s the same-old, same-old with oil and gas prices: high, higher and highest. Americans are now paying an average of $3.79 a gallon for gas, reports Adam Schreck for the Associated Press. Two markets actually topped the $4 gallon average this weekend: Chicago and Long Island.

Perhaps you want to consider a move to Tucson, AZ. Gas there is the cheapest in the country, at $3.48 a gallon.

Gas rose to $126.62 a barrel, and although it came close to the trading record near $128, a new closing record wasn’t set.

From the good news/bad news department, the good news is that some economists think the housing crisis and credit crunch may come to an end this year. The bad news is that the economy may still weaken further and unemployment will rise.

But next year, the economy is forecast to grow 2.3%, reports Jeannine Aversa for the Associated Press. The unemployment rate averaged 4.6% last year, and it will move higher, hitting 5.3% this year and 5.6% the next.

If weakness in the housing sector hits bottom this year and starts to make a turnaround, the economy should follow suit – it’s been cited as the factor most responsible for the mess we’re in.

All of this news affects ETFs that focus in on a number of areas. In particular, some of the funds that could be directly affected by these events include:

  • United States Oil (USO), up 35.1% year-to-date
  • United States Gasoline (UGA), up 17.8% since Feb. 28 inception
  • SPDR S&P Homebuilders (XHB), up 13.7% year-to-date
  • First Trust S&P REIT Index Fund (FRI), up 10.2% year-to-date

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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