Two sectors that have performed well over the past year and are poised to continue moving upward in a recovering economy are technology and consumer discretionary, according to Benzinga.com. Additionally, the transportation sector seems to have some appeal because transportation is required to move finished goods.

Technology is prospering because consumers have an insatiable desire for innovation, while the latest technology gives businesses a much-needed competitive advantage. (More on technology).  The sector can be accessed through the iShares Dow Jones U.S. Technology Sector Index Fund (NYSE Arca: IYW), which is up 54.6% year-to-date.

The consumer discretionary sector has been pummeled by recent economic conditions as consumers remain loath to spend. As the recovery continues and confidence is regained, though, it’s wise to keep in mind that the most beaten-down areas offer the greatest potential for growth. (Why donsumer discretionary is hot).  It can be accessed through the Vanguard Consumer Discretionary ETF (VCR), which is up 39.6% year-to-date.

On the same token, since this is expected to be a soft recovery, it’s worth keeping an eye on the consumer staples sector, as well. The unemployment rate is at a 26-year high, which means that there are still millions of people feeling the pinch. When they shop, they’re looking for what they need, not what they want. PowerShares Dynamic Consumer Staples (NYSEArca: PSL) is up 17.5% year-to-date.

The transportation sector has been hit hard and will naturally improve as the economy does; even Warren Buffett seems good value in the sector, based on his recent acquisition of Burlington Northern (NYSE: BNI). (Where transportation goes from here).  It can be accessed through the iShares Dow Jones U.S. Transportation (IYT) which is up 13.4% year-to-date. For more stories on the transportation sector, visit our transportation category.

The shipping sector is another indicator of how the world is recovering. Once global demand resumes, shipping prices should recover and an increase in available ships will be moot. (What challenges are facing the shipping industry?) As consumers begin to spend more and nations struggle to rebuild, this sector will ultimately reflect a shift in tides. Claymore/Delta Global Shipping (NYSEArca: SEA), up 29.1% year-to-date.

Last, but certainly not least, consider emerging markets. While the United States recovery lags, that doesn’t mean there are no opportunities. Emerging markets have outperformed handily this year – iShares MSCI Emerging Markets (NYSEArca: EEM) is up 61.6% year-to-date, vs. the S&P 500, which is up 20.4%.

For full disclosure, Tom Lydon’s clients own shares of EEM.

Kevin Grewal contributed to this article.

Activity in the shipping sector can send strong, indisputable signals about the state of the global economy. What’s the message it’s sending now? The signals seem to be mixed:

• Dry Ships (Nasdaq: DRYS) reported earnings on Monday, handily beating Wall Street’s estimates. The company said that increases in spot charter rates and higher revenues from drilling rigs helped the bottom line.

• The Baltic Dry Index last year shot up to a record high before collapsing. This year, the index has recovered, while still hovering below its 10-year average. Shipping prices also have remained flat, and could become more depressed as a new influx of ships come due for construction.

• Shipping demand is generally considered to be related to commodity demand, although commodities lately have struck out on their own, reports Mark Gongloff for The Wall Street Journal. (The shipping sector changes course).

Once global demand resumes, shipping prices should recover and an increase in available ships will be moot. (What challenges are facing the shipping industry?) Monitor the trend lines as this sector finds a firm footing. As consumers begin to spend more and nations struggle to rebuild, this sector will ultimately reflect a shift in tides. Read about trend following here.

For more stories about shipping visit our shipping category.

• Claymore/Delta global Shipping (NYSEArca: SEA): up 29.7% year-to-date



• PowerShares Global Progressive Transport (NYSEArca: PTRP): up 46.9% year-to-date

Specialty-sector ETFs, or “thematic” ETFs, have become a hit with investors, covering more than 40 unique themes in the market with more than $10 billion in assets under management, according to IndexUniverse.

While some consider thematic ETFs “gimmicky” and believe these forms of ETFs are only popular when the media is hyping the sector, they have their advantages and an investor should be aware that such options are available.

Specialty ETFs can help round out a portfolio and allow investors to take advantage of different segments of the market. To spot opportunities, watch the trend lines.

Alternative energy. Skyrocketing energy prices have brought more investor interest to all sorts of energy investments. The largest alternative energy ETF is PowerShares WilderHill Clean Energy Portfolio (NYSE Arca: PBW), currently up 23.4% year-to-date, with $743 million in assets under management. PBW is more focused on U.S.-listed companies.

Coal. The cheapest energy source of BTUs. Ever-increasing oil prices are encouraging the development of the coal. The largest coal ETF is Market Vectors Coal ETF (NYSE Arca: KOL), currently up 1.3.4% with $277 million in assets. KOL primarily includes mid-cap miners, weighted 49% in U.S. companies, 23% in China and 15% in Indonesia.

Nuclear. Once operational, nuclear power is seen as the cheapest kind of energy, but the industry is still grappling with the issue of nuclear waste. The largest nuclear ETF is Market Vectors Nuclear Energy ETF (NYSE Arca: NLR),  currently up 21.7% year-to-date, with $166 million in assets. NLR has a 40% allocation to uranium miners, with other weightings in power generation and plant construction firms.

Commodities. ETFs are an easy way for a commodity trader to access this area of the market. The largest hard asset commodity ETF is Market Vectors Agribusiness ETF (NYSEArca: MOO), currently up 40% year-to-date, with $1.5 billion in assets. Other areas include water resources, steel, timber and broad-based commodities.

Infrastructure. Infrastructure covers companies involved in construction and repair of roads and bridges, building and maintaining power grids, telecommunication networks and sewage systems. Worldwide stimulus funds have been steadily injecting more money into the sector. The largest infrastructure ETF is iShares S&P Global Infrastructure Index Fund (NYSE Arca: IGF), currently up 12.9% year-to-date, with $267 million in assets.

Transportation. There’s no denying the economic impact of transport systems. The Claymore/Delta Global Shipping ETF (NYSE Arca: SEA) is currently up 25.9% year-to-date, with more than $70 million in assets. SEA is a good indicator for economic activity and commodities demand.

Green. The green sector provides environmentally-friendly technology for an evolving society. The largest green ETF is PowerShares Cleantech Portfolio (NYSE Arca: PZD), currently up 29.8% year-to-date, with $145 million in assets. PZD tracks the performance of companies whose products improve productivity while reducing consumption of natural resources.

Other. Or “miscellaneous” category that includes gaming, luxury items and Chinese real estate to name a few. The largest ETF in this area would have to be Market Vectors Gaming ETF (NYSE Arca: BJK), currently up 46.7% year-to-date, with $108 million in assets. BJK tracks global gaming companies.

Max Chen contributed to this article.

Things have been tough for shipping companies as corporations around the globe have implemented lean measures, including trimming inventories and cutting order loads, to cope with the global economic crisis.  Most recently, Danish shipping giant Maersk Line, reported a loss in the first half of the year of nearly $1 billion because of a reduction in freight rates and lower transport volumes.

According to Analia Murias of FIS Worldnews, shipping companies have been partnering with ship owners to inject capital and/or sell dispensable assets as well as renegotiating contracts with shipyards to cope with the downfall.

Things are improving for shipping companies as the overall health of the global economy improves and businesses start to replenish inventories that have been depleted.  Experts in the industry, however, such as the head of Maersk, believe that the recovery will be slower than in other sectors and industries.

• Claymore/Delta Global Shipping Index (NYSE Arca: SEA): up 23.6% year-to-date.

For more stories on shipping, visit our shipping category.

Kevin Grewal contributed to this article.

During the first six months of the year, the shipping industry shrank by almost 16%, the first accounted stunt in growth for the industry, report Alexander Jung, Thomas Schulz and Wieland Wagner for Spiegel Online. The number of containers being shipped by America is down 19.2%, Europe is down 17.8% and Asia is down 14.8%,  reports Speigel Online.

Among other worrisome statistics:

• The giant ships are sailing half-empty or left docked in harbors.
• Billions are still being spent on ports with diminished traffic.
• Bankruptcy looms over leading shipping line operators, shipping banks and charter shipping companies.
• New orders for ships currently represent 50% more than the worldwide container capacity; this excess capacity could depress shipping prices. In an attempt to reduce loading capacity, companies are decommissioning ships. Chairman of the Maritime and Port Authority of Singapore Lucien Wong calculates that 450 container ships, or 10% of the global fleet, are now idle worldwide.

All the problems stem from the drastic declines in consumption in the West and production in the East. Companies currently get around $500 to ship a container from Asia to Europe, or $300 less than break-even. Compared to a year ago, companies were collecting more than $1,500 per container.

There are some shipping companies that have remained financially strong, however, and they’re accused of fueling a price war to gain a large piece of the market. While none of the major companies are turning a profit right now, ones with backing from strong corporations or governments are in a better position.

• Claymore/Delta Global Shipping (SEA): up 22.8% year-to-date

For more information on shipping, visit our shipping category.

Max Chen contributed to this article.

From the waters off Asia to Europe, about 10% of the world’s merchant trade ships remain anchored because of the fallout of global trade. The Baltic Dry Index, a composite measure of the cost of shipping bulk cargoes such as iron ore and coal, has been hit hard by the recession. It has fallen 90% between October of last year and June, reports The Economist.

There is also a backlog of new ships, which equals two-thirds the capacity existing, and many are due for order off shipways over the next four years. This could exceed the need of the market anywhere from 50%-70%.

On the other hand, some manufacturers are noticing an increase in orders, reports Guy Campanile for CBS News. As more countries recover and begin to order raw materials, then ship the finished goods, the sector could begin to see renewed growth.

• Claymore/Delta Global Shipping (SEA): up 22% year-to-date

For more stories about shipping, visit our shipping category.

Guggenheim Partners and Claymore Group have announced that they’ve entered into an agreement and plan to merge. As part of the deal, Claymore Group will become a wholly owned subsidiary of Guggenheim Partners. The terms of the deal haven’t yet been disclosed, and the deal is expected to close at the end of the third quarter after clearing customary regulatory hurdles.

Claymore President Christian Magoon said that his belief is that ultimately, the deal will help grow Claymore’s business, thanks to the trusted Guggenheim name.

“It will strengthen our business, because we’ll have the ability to leverage Guggenheim’s world-class institutional management and research in conjunction with Claymore’s use of innovative strategies,” Magoon says.

Claymore is a popular and thriving ETF provider in both Canada and the United States. In the United States, their ETFs hold about $1.9 billion in assets and share creation is up 60% year-to-date. In Canada, they have $2 billion in assets and share creation is up 90%.

Guggenheim is a purely institutional operation with ultra-high-net worth clients. The average account there is about $400 million. Now that the two are teaming up, it will enable Guggenheim to bring offerings to retail investors, as well.

Here are some other things for investors to think about in the wake of this deal:

• Is it actually done? That’s still up in the air. Investors may recall that when Barclays put the line of iShares ETFs up for sale, their first deal came with a clause that enabled them to solicit other offers. That ultimately ended in BlackRock winning the deal.
• Different ETFs? Claymore is known for innovation and creativity – they’ve got the Claymore/Delta Global Shipping ETF (SEA) and Claymore/MAC Global Solar Energy (TAN). Guggenheim, on the other hand, is known for its work in the fixed-income space, and we may see more broad-based asset class ETFs come out of this, as well.
• More Activity? Claymore has been quiet so far this year. Now that this deal has been put together, perhaps we’ll seem them ramp up their ETF production and be more visible.

The Claymore/Delta Global Shipping (SEA) reflects the Delta Global Shipping Index, which measures the performance of maritime shipping industry firms in global developed markets, writes Done Dion for TheStreet. The ETF’s portfolio has dry bulk goods and the leasing and/or operating of tanker ships, container ships, specialty chemical ships and liquefied gas or dry bulk goods transport ships.

SEA has 30 holdings with an expense ratio of 0.65%. The fund has a 58.7% allocation in industrials and 41.3% allocation in energy. The components within the fund are based on market capitalization and liquidity.

Investors are coming back into shipping, realizing that countries such as China are demanding materials en masse. More recently, the shipping industry is being driven by steel demand and higher demand from China and emerging markets will likely raise rates on dry bulk shipping.

When talking about the shipping industry, the most important ratio is “bottoms,” or number of ships, to demand for transported goods. If there are more products than bottoms then the rates are high; if there are more bottoms than cargo, then rates are low.

• Claymore/Delta Global Shipping (SEA): up 17% year-to-date

For more information on shipping, visit our shipping category.

Max Chen contributed to this article.

Since 2000, the Middle East has seen growth above 5% and has become the second richest part of the emerging world, according to ETF Grind. But Mideast economies were slower to recover in the beginning of 2009 and there were concerns over the ability of the region to pay down debt accumulated in the good years.

Over the long-term period, there are several ETFs that an interested investor could keep an eye on:

• iShares MSCI Turkey Invest Mkt Index (TUR): up 30.9% year-to-date. Turkey’s economy isn’t tied too heavily to oil. It remains dependent on exports to the EU. The country’s industrial sector can profit from its close proximity to oil producers.
• Market Vectors Agribusiness ETF (MOO): up 36.6% year-to-date. Economic develpment and population growth would make the Middle East would effect global food demand more than elsewhere since the region has little arable land. Middle Eastern countries are already securing land for a steady food supply and will need the necessary equipment and supplies.
• PowerShares Global Water (PIO): up 10.8% year-to-date. Needless to say, the region has a scarcity of freshwater. The Middle East has the biggest market for desalinization plants and expensive water engineering projects. PIO holds 29 global water resource firms.
• Market Vectors Gulf States ETF (MES): up 15.4% year-to-date. MES covers Middle Eastern countries that border the Persian Gulf. It is weighted toward finance, real estate and services. Its expense ratio is 1.00, but it is a pure play on oil related economies.
• iShares MSCI Israel Cap Invest Mkt Index (EIS): up 33.5% year-to-date. Israel has reputable pharmaceutical and tech sectors.
• Claymore/Robb Report Global Luxury (ROB): up 13.3% year-to-date. When crude oil rises again, Middle Eastern royals will be swiping their super platinum cards in purchasing luxury goods.
• PowerShares MENA Frontier Countries (PMNA): up 15.9% year-to-date. PMNA is similar to GULF but excludes gulf nations of Qatar, Bahrain, and Oman. It also has a higher expense ratio. It is broadly diversified with Morocco and Egyptian firms. The fund mainly invests in large and mid caps.
• Claymore/Delta Global Shipping (SEA): up 31.8% year-to-date. Recovery in oil prices and Middle East production could translate into strong earnings for global shippers. Crude oil makes up aruond 1/6 of global trade.
• WisdomTree Middle East Dividend (GULF): up 8.4% year-to-date. GULF has a broad market Middle East and North Africa exposure. It has a wider selection of holdings than PMNA or MES, a lower expense ratio, and is dividend weighted rather than capitalization weighted. But the funds competition, GULF is a little low on volume.
• iShares Dow Jones U.S. Oil Equipment Index (IEZ): up 39.7% year-to-date. Major equipment and service companies included in this fund have business in the Middle East. IEZ has outperformed crude oil ETFs and indexes of major integrated oil companies year-to-date.

As always, watch the trend lines to see what actually materializes.

For more stories on the Middle East, visit our Middle East category.

For full disclosure, Tom Lydon’s clients own shares of MOO.

Max Chen contributed to this article.

It is clear that the emerging market is recovering faster than developed ones, according to ETF Grind. While developed markets are spurred by consumption, emerging markets are driven by investments. ETF Grind provides some funds that an investor may peruse so as to capitalize on the emerging markets over the next few years.

We should note, too, that there are many other ETFs that can provide similar exposure as the world decouples – this is merely a sampling:

• First Trust ISE Glb Engineering and Construction (FLM): up 12.2% year-to-date. The FLM  includes firms that specialize in designing and building infrastructure products. It also includes big-margin engineering and design firms, and focus less on materials and equipment.
• iShares MSCI BRIC Index (BKF): up 53.4% year-to-date. Emerging market funds often include countries that may not decouple as easily, such as South Korea, Mexico and Poland. But BKF provides exposure to the four BRICs emerging markets.
• PowerShares Emerging Markets Infrastructure (PXR): up 55% year-to-date. PXR it invests almost exclusively in firms that build infrastructure, and not in companies that operate and maintain infrastructure. The fund includes emerging market leaders and a few Western companies.
• Claymore/Delta Global Shipping (SEA): up 32.7% year-to-date. SEA invests in companies within the global shipping industry.
• PowerShares DB Commodity Index Tracking (DBC): up 12.7% year-to-date. DBC invests in the six most traded commodities: crude oil, heating oil, aluminum, wheat, gold, and corn.
• iShares S&P Global Materials (MXI): up 30.5% year-to-date. MXI tracks globally active firms that deal in materials. The fund is heavily weighted toward firms situated in developed markets, but they are international conglomerates with operations in emerging markets.
• Emerging Global Shares DJEM Energy Titans (EEO): This brand new fund holds 40 energy firms in emerging markets.  It is weighted toward Russian companies, which make up around one-third of the holdings.
• CurrencyShares Australian Dollar Trust (FXA): up 15% year-to-date. The Australian Dollar is a true “commodity currency” since its value is dependent the country’s natural resource exports.
• Market Vectors Agribusiness ETF (MOO): up 36.2% year-to-date. MOO invests in international agribusinesses.
• WisdomTree Dreyfus Emerging Currency (CEW): up 0.4% in the last week. CEW is new on the scene. It invests in a range of emerging market currencies that could appreciate against the U.S. dollar. It includes currencies such as the Chinese Yuan, Indian Rupee, Brazilian Real and South African Rand.

Emerging markets do have a higher risk profile than those of established foreign and U.S. markets, writes Jim Lowell for MarketWatch. But high inflows into emerging market ETFs warrants another look into this potentially lucrative area. Lowell provides the following areas of interest in the emerging markets:

Brazil. It is a viable and diversified economy that has also has good ties to the global economy.

• iShares MSCI Brazil Index (EWZ): up 64% year-to-date

South Korea and Taiwan can be traded depending on the technology sector.

• iShares MSCI South Korea (EWY): up 33.8% year-to-date
• iShares MSCI Taiwan Index (EWT): up 50.2% year-to-date

India moves along side with the global economy and China is an economic powerhouse in the global stage.

• PowerShares India (PIN): up 57.8% year-to-date
• iShares FTSE/Xinhua China 25 Index (FXI): up 35.9% year-to-date

In Emerging Europe, Russia could be played in relation to the price of oil.

• Market Vectors Russia ETF (RSX): up 97% year-to-date

Israel has strong industries in technology, biotech, and defense.

• iShares MSCI Israel Cap Invest Mkt Index (EIS): up 40.1% year-to-date

South Africa is noted for its metals and mining, or gold industry.

• iShares MSCI South Africa Index (EZA): up 27.6% year-to-date

Read the disclaimer, as Tom Lydon is a board member of Rydex Funds.

For full disclosure, some of Tom Lydon’s clients own shares of MOO.

Max Chen contributed to this article.