Will Broad Market ETFs Set New Records in 2011? | ETF Trends

The Dow Jones Industrial and exchange traded funds (ETFs) have come a long way from market lows hit on March 9, 2009. Since then, the markets have made a huge rally and a new record high could be within its grasp.

Over the last 21 months, the Dow has surged 76%, and the exchange would only have to go around 23% more to set a new record high, reports Stan Choe for Forbes. History shows that the Dow has jumped 23% more than six times since 1985, so it’s possible for a few reasons:

  • Market conditions may favor the continued rally in equities. Corporate bonds lack the potential for quick appreciation and interest rates remain at record lows. On the other hand, corporate earnings are steadily increasing, which brings more investors to equities, and they are offering higher dividends. [Corporate Earnings: Good for ETFs, So-So for Recovery.]
  • Previous economic recoveries have lasted an average of almost five years and we are only about one and a half years into our recovery. In the last recovery cycle, the Dow posted 25% gains. Other years that the markets posted significant gains were 1985, 1989, 1995, 1996, 1999 and 2003.

While history is on their side, what the major market indexes do in 2011 depends on a number of factors: improved corporate earnings, a reduction in unemployment and signs that a stronger and more sustained economic recovery is possible.

But it’s not inconceivable to think that most major indexes will, in fact, hit new highs. ETFs like SPDR S&P 500 ETF (NYSEArca: SPY) and SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) are certainly close enough that it looks possible. PowerShares QQQ Trust (NASDAQ: QQQQ) may have to wait, though; the NASDAQ is a long way off its March 2000 highs!

What we know right now is that the major indexes are all above their long-term trend lines. Now they just need to stay there.

For more on the Dow, visit our Dow Jones Industrial Average category.

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. 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.