Have Stock ETFs Put the Fear Behind Them? | ETF Trends

Exchange traded funds that invest in stocks and the euro rallied Monday with investors hoping equities ETFs have put in a short-term low as European markets firm somewhat before a key meeting this week.

SPDR S&P 5oo ETF (NYSEArca: SPY) and CurrencyShares Euro Trust (NYSEArca: FXE) were both up more than 1% in early trading after last week’s volatile swings.

Investors are worried that the stock correction the past two weeks is similar to the fall of 2008, when a financial crisis and equities pullback presaged an economic contraction and further weakness in stocks.

David Kelly, chief market strategist at JP Morgan Funds, says the fear is overblown.

“First, while the stock market has been very volatile, there has been no significant disruption in the banking system. Moreover, unlike 2008, there has been no great concern about the adequacy of bank capital or a breakdown in inter-bank lending,” Kelly wrote in a weekly outlook Monday.

“Second, on the economy, the decline in confidence over the past two months is quite similar to the slide that occurred in 2008. However, three years later, the economy appears less vulnerable to a decline in confidence,” he added.