Some exchange traded funds (ETFs) that have dropped the most recently are now experiencing handsome rebounds. Closed-end fund Van Kampen Senior Income Trust (VVR) lost more than 25% in a matter of weeks because of the subprime debacle. However, it’s up 14.7% from its recent low on August 15.
Up until the subprime storm blew in, VVR steadily chugged along above its trend line. The subprime problems that lead to a wide credit crunch especially hurt VVR because it invests in floating or variable-rate senior loans to corporations in various industries. Talk about bad timing to be invested in loans. Some of the industries involved with VVR include consumer staples, energy, financials, health care, information technology, industrials and materials. The Federal Reserve’s recent discount rate cut and cash injections into the U.S. banking systems likely gave these types of funds some needed comfort.
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.