Spring is upon us and April is typically a month of market bloomers that lays the groundwork for the spring performers, but the markets and exchange traded funds (ETFs) may be hindered by some economically constraining factors.
The government has taken up another round of exuberant spending, with little concern for much of the economic consequences, and the Fed is inching up interest rates, which could hinder growth and income investors, home builders and buyers, and our consumption driven economy, remarks Jim Lowell for MarketWatch.
Lowell suggests looking into the Short 20+ Year Treasury ProShares (NYSEArca: TBF), as a way to bet against inflation, along with the the eventual interest rate hikes that follow, and the negative effects increased spending has on Treasuries. If shorting our debt makes sense, then so does supporting debt that is financing actual growth, such as the iShares JPMorgan USD Emerg Markets Bond (NYSEArca: EMB), which focuses on long-term growth of emerging marktes and the debt needed to finance such growth. [Interest Rate Hike Impact.]
Additionally, Lowell argues that health care stocks trend favorably in rising rate environments since they tend to lose less on the S&P 500 down days and they are a smart offensive play. Not to mention, the emerging global consumer class is creating an incrementally greater demand for better health care as a larger middle class forms in emerging markets. He suggests playing the sector with the pharmaceuticals heavy iShares S&P Global Healthcare (NYSEArca: IXJ). [ETFs for Obama’s Health Care Overhaul.]
Then, there are commodities, the tried and true global growth-oriented inflation fighter. Investors usually turn to energy or gold. Other options can be found in soft commodities like sugar, flour, wheat and corn. Timber is also a good option to play as economies expand. [Agriculture ETFs Could Grow After Spring Rains.]
- United States Oil (NYSEArca: USO)
- PowerShares DB Gold (NYSEArca: DGL)
- PowerShares DB Agriculture (NYSEArca: DBA)
- iPath Dow Jones AIG Sugar TR Sub-Index ETN (NYSEArca: SGG)
- Claymore/Beacon Global Timber Index (NYSEArca: CUT)
Finally, small-cap growth-oriented investments like iShares S&P SmallCap 600 Growth (NYSEArca: IJT) do well since companies grow through sales instead of financing, which makes them less vulernable to rising rates but will be ignored if rates rise too high. [Why Small-Cap ETFs Are Outperforming.]
Max Chen contributed to this article.
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.