5 Silver Linings Among the ETF and Market Clouds | ETF Trends

The markets keep touching on lows not seen in more than a decade. It’s grim out there. But on the flip side, there are a few reasons to be optimistic about the overall market, securities and exchange traded funds (ETFs).

We’re not saying it’s time to dive back in. Most of the key numbers out there are bad, bad, bad. The Dow Jones Industrial Average today dropped to the lowest it’s been since 1997. Wall Street appears to be battening down the hatches for a long recession. The question of how and if the $787 billion stimulus will work remains unanswered. More companies each day are reporting losses and layoffs.

But believe it or not, there are some interesting things happening that investors can look to.

David Merkel of Seeking Alpha states the following five reasons for such optimism:

  • Credit spreads have been declining and more corporate bond deals are getting done in the credit markets. You may want to take a look at some ETFs that track corporate bonds, such as the Vanguard Total Bond Market ETF (BND), which is down 2.5% over the last month.
  • Commodity prices have fallen and stabilized. For broad based exposure to commodities, one might take a look at PowerShares DB Commodity Index Tracking Fund (DBC), which is down 11.5% over the last month.
  • The balance sheet of the Federal Reserve is shrinking. Some borrowers are actually paying the Fed back.
  • Money market and other short duration funds seem to be safe. You may want to take a look at the WisdomTree U.S. Current Income Fund (USY).
  • Equities are cheap relative to cash, but are still expensive relative to junk and low investment grade bond yields. Some believe that equities have weathered much of the bad news that has hit the overall market. But be careful – some believe that it could get worse. Watch the trend lines before making any moves.

Eventually this market will make a recovery, and you want to be ready when it hits. But it seems like for now, we’re going to be waiting awhile.

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.