Annual forecasts should always be taken with a grain of salt because nobody has the ability to predict where the S&P 500 will be in 12 months unless they make a lucky guess.
That said, I can’t resist making some predictions on the major ETF and market trends I see for 2013.
Part of this exercise is that it allows me to look back at the end of the year to see how right — or wrong — I got things in early January.
So here we go with five predictions:
1. Dividend investing and ETFs won’t die: Dividend ETFs slightly trailed the S&P 500 in 2012 after trouncing the index in 2011. I expect dividend-themed ETFs to turn in another good year in 2013. They aren’t a substitute for bonds because equities are more volatile, but investors need to look elsewhere for income with 10-year Treasuries yielding less than 2%. Yes, the fiscal cliff compromise boosts the dividend tax rate to 20% from 15%, but it’s only for individuals earning over $400,000 a year, or $450,000 for married couples. However, S&P 500 companies paid out cash dividends of $281 billion last year, and the total should rise in 2013 as companies continue to shore up their balance sheets in the wake of the financial crisis. The largest dividend ETFs include iShares Dow Jones Select Dividend Index Fund (NYSEArca: DVY), Vanguard High Dividend Yield Index Fund (NYSEArca: VYM), SPDR S&P Dividend ETF (NYSEArca: SDY) and WisdomTree LargeCap Dividend Fund (NYSEArca: DLN). [Three Reasons Not to Flee Dividend ETFs]