With ETFs, There Are Ways to Play Lower Industrial Output

September 15th at 11:00am by Tom Lydon

Industrial output has broad implications for the economy and exchange traded funds (ETFs), so it isn’t good that it plunged by the largest amount in three years.

Output fell by 1.1% last month, and economists were expecting a drop of just 0.3%, reports Martin Crutsinger for the Associated Press. Nearly every sector was hit, too: utilities were off by 3.2%, autos were down 1%, mining, which includes drilling for oil and gas, fell 0.4%.

According to Max Rottersman for ETF Guide, there are ways investors can play this plunge with ETFs. For nearly 30 years, our country has reveled in a boom in productivity and innovation. But now that that’s waning, how are we supposed to become richer? Where do we invest in this kind of slump?

  • Our national security runs on the military, which runs on fuel. Therefore, Rottersman notes that certain ETFs should benefit: PowerShares Aerospace & Defense (PPA), iShares GSCI Commodity-Indexed Trust (GSG) and Energy Select Sector SPDR (XLE).
  • Rottersman believes financials are going to be in recovery mode for a long time, giving the ProShares UltraShort Financials (SKF) a chance to shine.
  • If history repeats itself, housing prices might become the least of our worries. Perhaps we’ll want to start looking around the world again: SPDR MSCI ACWI ex-US (CWI) and Vanguard FTSE All-World ex-US (VEU).

Watch the trends, see what they’re doing and act accordingly. If lowered productivity does affect these funds and they move above trend lines, great; if they don’t, stick to the plan and let them go when they fall below their long-term trend lines or 8% off the recent high.

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.