Making Predictions With Financial ETFs Is Impossible | ETF Trends

The financial sector and related exchange traded funds (ETFs) are in a pit these days. Most of them are trading 50% or more off their highs, and who knows where we’re going to go from here?

The financial services industry is in uncharted water right now, and who knows what it will be like in six months, let alone six days, says Matthew Hougan for Index Universe.

Making matters worse is a push-pull taking place in nearly every corner of the market: the bailout plan is still in the works, Wall Street banks are begging for money and the presidential candidates won’t directly comment on the crisis or what they’d do to turn things around.

Hougan has these points to ponder:

  • We don’t know for sure that the bailout will go through
  • We don’t know for sure that the bailout will work
  • We don’t know for sure what regulations will be enacted next year by Congress to constrain the financial sector in the future

The temptation to call a bottom is a strong one – it’s hard to imagine things getting much worse than they are now. But the truth of the matter is, no one really knows the answer to these questions and on one can predict the future.

We think sticking to your strategy is the smartest move for now – wait until a recovery begins, this sector trends up and the funds within it move above their 200-day moving averages before considering whether they’re a fit in your portfolio.

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.