The financial crisis dragged world exchange traded funds (ETFs) down, but investors are now coming back and stock markets are thriving again. There are still plenty of funds off their highs and presenting buying opportunities.
Investors tend to bid up equity prices too high when an economy is expanding, and investors overreact on the downside when the economy tanks or the future becomes murky, remarks Jacob Wolinsky for GuruFocus. For instance, Russia’s stock market plummeted 83% since its peak in May 2008 through February 2009; however, the Russian stock market has bounced back 173% since February. (Why Russia may see more growth).
Wolinsky has compiled a list of countries and their respective ETFs to illustrate the percentage decrease during the financial crisis, the percent increase since the March lows and the percentage the ETF is off from its peak.
- Market Vectors Russia ETF (NYSEArca: RSX): decreased 82%, increased 185% from lows and is 51% off its peak.
- iPath MSCI India Index (NYSEArca: INP): decreased 78%, increased 144% from lows and is 54% off its peak.
- SPDR S&P China (NYSEArca: GXC): decreased 68%, increased 109% from lows and is 34% off its peak.
- iShares MSCI Italy Index (NYSEArca: EWI): decreased 72%, increased 97% from lows and is 54% off its peak.
- iShares MSCI Brazil Index (NYSEArca: EWZ): decreased 70%, increased 152% from lows and is 24% off its peak.
It should also be noted that four of the ETFs cover BRIC (Brazil, Russia, India and China) countries. These countries experienced a severe sell-off during the downturn, but investors are buying into the latest craze and are pouring into these “hot” investments. (The ultimate BRIC guide).
The data reveals that markets have made a quick rebound, but it also shows that there is still some room to grow before they hit their prior levels. Though the ETFs may be selling below their peak, it is prudent to have a strategy in place to protect yourself. (How to find out which ETFs are above their trend lines).
We usually watch the 200-day moving average to help us decide our course of action. (An ETF trend-following plan for all seasons). The funds listed above are just ideas – there are plenty of ETFs out there that are both still well off their peaks and above their trend lines. It’s all about spotting opportunities.
For more information on trend following, visit our trend following category. For more information about discipline and creating a strategy, read The ETF Trend Following Playbook.
Max Chen contributed to this article.
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.