Global exchange traded funds (ETFs), for the most part, have been hit harder than any other area. Most are at least 50% off their highs, while some are a full two-thirds or even more.
As the U.S. economy slumps further, banks are lending less, leading to consumers spending less, hurting imports and exports, and so on. Weak corporate earnings reports are fueling the fire and concerns that this economic slump might not be quick or short.
Some of the hardest-hit funds and economies these days still have billions in assets still residing in them. While many investors have shifted to the sidelines or to traditional safe-havens, there are still many others hanging on. “I can’t sell now,” is a popular sentiment, and we wonder how many of those assets are from investors in that predicament.
What to do?
If you’re a buy-and-hold investor, if it would make you feel comfortable to sell one-third of your portfolio before suffering further losses, consider it. In our trend-following report, we discuss what to do if you’ve missed your sell point (we use 8% off the recent high or below the 200-day moving average):
What should you do if you missed the 8% drop, and you’re down much further than that? Missing the sell point creates the conundrum above. That’s when I recommend the following:
- Sell 1/3 of your equity holdings and focus on the most aggressive positions—those that might be down 20-30% and trading 10-15% below their 200-day moving averages.
- If those holdings decline by another 5-7%, consider selling another third.
- Keep an eye on the 200-day average of these positions. As the trend lines continue to decline, there will be an excellent buying opportunity in the future when the markets eventually rebound.
Many funds are getting badly beaten up in these markets, including:
- SPDR S&P Emerging Europe (GUR): 68.8% off Dec. 10, 2007, high; $82 million assets
- iShares MSCI Austria (EWO): 66.6% off June 4, 2007, high; $185 million assets
- iShares MSCI Belgium (EWK): 69.6% off July 12, 2007, high; $79 million assets
- iShares MSCI South Korea (EWY): 66.8% off Oct. 31, 2007, high; $1.9 billion assets
- iShares FTSE/Xinhua China 25 (FXI): 66.4% off Oct. 31, 2007, high; $6.1 billion assets
- iShares MSCI Brazil (EWZ): 67.3% off May 20, 2008, high; $5.7 billion assets
- Market Vectors Russia (RSX): 75.8% off May 19, 2008, high; $862 million assets
- iPath MSCI India (INP): 73.4% off Jan. 14, 2008, high; $535 million assets
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.