Can a new, narrowly-based exchange traded fund (ETF) give investors something new within its sector?
The Claymore/Clear Global, Exchanges, Brokers and Asset Managers Index ETF (EXB) was released in July and since its launch, the market has been through a fair test to determine if it can survive the stress. Roger Nusbaum for TheStreet.com reports that what differentiates this ETF from its peers, iShares Dow Jones U.S. Broker-Dealers (IAI) and KBW Capital Markets ETF (KCE), is its foreign exposure. Since the EXB’s inception, the Hong Kong Exchange has doubled in price, going from more than a 4% weight to an 8% weighting. The international components have helped EXB because global holdings have been better than domestic ones in this sector. For example, when Merrill Lynch (MER) took a big hit recently, EXB was only down a fraction of 1%.
Remember that the financial services sector is the largest in the S&P 500 and is also the most complex. The market needs this sector to go anywhere, and this sector tends to provide warning as to when problems are looming ahead through an inverted yield curve. Nusbaum says that when short-term interest rates are higher than long-term interest rates, the best strategy is to underweight the sector.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. 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.