6. In recovery, small-caps and value will see action. Since the market’s March 9 low, value is up 78.5% compared to growth, which is up about 72%. Small-caps have also fared well since the market bottomed out: they’re up about 81% since the low, while large-caps are up 65%. The numbers across the board are good, but it reinforces the notion that in recoveries, small-caps and value tend to lead the way. [Is the time right for small-caps?]
7. Investors will wise up about fees. We called it – fees became more of a battleground than ever. Schwab’s ETFs were launched with commission-free trading at Schwab, and many believe that they won’t be the only ones to do so. Investors are getting smarter about their options and many have discovered that ETFs offer a low-cost, liquid, transparent option for them. [What are ETFs?] Fees are one of the several reasons that investors turned to ETFs this year – after all, the average actively managed mutual fund fee is 1.52%. Investors are beginning to understand the impact a few basis points can have over 30 or 40 years.
8. ETF provider competition will heat up. PIMCO and Schwab both entered the ETF game but that is only the tip of the iceberg. BlackRock bought iShares, Guggenheim bought Claymore, Jefferies Asset Management came out with some funds. Names that weren’t even on the radar a year ago are now players in the ETF industry.
9. ETFs will surpass $1 trillion in assets. In the United States, we were a little off. But at the end of November, global ETF assets stood at a whopping $1.1 trillion. U.S. ETF assets as of November stood at $751 billion – it’s an all-time record for the industry, but it’s not $1 trillion. Yet. [November ETF assets mark more records.]
10. Emerging markets bounce back. Did they ever! Since the market’s March 9 low, emerging markets have rebounded about 100% vs. the S&P 500’s 65% gain in that period. The assets poured in, too: as of November, assets in iShares MSCI Emerging Markets Index (NYSEArca: EEM) were up 94%; assets in Vanguard Emerging Markets Stock (NYSEArca: VWO) are up 54% in the same time frame. [Competition heats up in emerging market space.] ETF providers were quick to come out with new offerings targeting the space: Claymore and Global X have some single-country and China-focused sector funds, while Emerging Global Shares has a growing line of broad sector emerging market funds.
Max Chen contributed to this article.