The S&P 500 (^GSPC) has nearly tripled since the March 9, 2009 market bottom. Plenty of individual stocks (obviously) and exchange traded funds have gone along for the ride.
Dividend ETFs have thrived as the Federal Reserve pushed interest rates lower, forcing investors to embrace stocks as part of their income-generating plans. At the sector level, health care and consumer discretionary ETFs, just to name two groups, have offered jaw-dropping performances since the 2009 market bottom. [Sector ETF Investing: A Long-Term Perspective]
While scores of ETFs have hit strings of new all-time highs this year, some are still a long way of achieving that status. That is not to say those ETFs that have failed to reach all-time highs this year are “bad” funds.
Some have still managed to string together new 52-week highs. However, a fair amount of ETFs are still nowhere close to reclaiming the highs set prior to the global financial crisis.
Some of those funds will go under the microscope in this list in an effort to see which ETFs stand credible chances of eventually reclaiming their pre-crisis highs and which may never recapture past glory.
Ten ETFs are included here along with 2013 performance and how far away from pre-crises highs the funds are as of Friday’s close. Let’s get started with the…
United States Oil Fund (NYSEArca: USO)
YTD: Up 0.6%
Decline From Pre-Crisis High: 71%
Comment: It may not be a bad thing that USO, which tracks front-month West Texas Intermediate crude contracts, is so far removed from its 2008 highs. After all, oil at $120, $130 or more per barrel can constrain demand and economic growth. Oil is one of the most volatile commodities, so USO certainly has the potential to rise again, but surging U.S. output could prevent the ETF from seeing its 2008 highs for a long, long time. [Brent, WTI Spread Continues to Widen]
iPath MSCI India Index ETN (NYSEArca: INP)
YTD: Down 12.7%
Decline From Pre-Crisis High: 52%
Comment: India ETFs rank among the more volatile in the emerging markets arena, meaning it is not implausible that INP could rally and do so in short order. However, with growth slowing in Asia’s third-largest economy and inflation there still high, expecting a double out of any India ETF or ETN in the near-term is asking a lot. [Expect Moderate Growth in India ETFs]
Market Vectors Agribusiness ETF (NYSEArca: MOO)
YTD: Down 0.8%
Decline From Pre-Crisis High: 19.5%
Comment: At less than 20% below its pre-crisis high, which was barely above $64, MOO stands as one of the more plausible ETF candidates for an eventual return to past glory. The key to MOO’s fortunes, as it often is, is global potash pricing and demand.
Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO)
YTD: Down 9%
Decline From Pre-Crisis High: 39%
Comment: VWO, the largest emerging markets ETF by assets, is one of many emerging markets funds that could reside on this list. A 39% move in the near-term is not likely, but if VWO can clear $42, then $44, the fund could deliver some nice upside in the coming months. That upside will have to accrued without exposure to South Korea, because FTSE, the index provider for VWO, does not classify Asia’s fourth-largest economy as an emerging market.
iShares Mortgage Real Estate Capped ETF (NYSEArca: REM)
YTD: Down 17.8%
Decline From Pre-Crisis High: 77%
Comment: Mortgage REIT ETFs were supposed to have benefit from the Federal Reserve’s easy money policies, but higher interest rates diminish the chances that homeowners will refinance their mortgage rates. Consequently, the securities held in ETFs like REM have declined in value to reflect the rising risk of holding high duration bonds over a longer period. [Rising Rates Burn mREIT ETFs]
iShares MSCI Brazil Capped ETF (NYSEArca: EWZ)
YTD: Down 15.2%
Decline From Pre-Crisis High: Roughly 50% and that is being a tad conservative.
Comment: EWZ is one of the 10 worst ETFs this year in terms of outflows. Additionally, Latin America’s largest economy is contending with a weak currency, declining commodities demand and stagflation. Another run at $100 for EWZ seems unlikely, even when stretching one’s time horizon out a couple of years. However, advisors are nibbling at Latin America ETFs again and EWZ has jumped 14% since its September lows. [Advisors Wading Back Into LatAm ETFs]
iShares China Large-Cap ETF (NYSEArca: FXI)
YTD: Down 4.5%
Decline From Pre-Crisis High: 42%
Comment: Forty-two percent sounds like enough to rule FXI out of an imminent return to its glory days, but that does not mean China ETFs are not offering opportunity. Chinese stocks are viewed as inexpensive and the market has become a favorite among global banks that are expecting the world’s second-largest economy to be lead an emerging markets equity recovery next. Pivotal to FXI’s fortunes is the ability of state-run companies to participate in upside for Chinese stocks. [China ETFs Gain Fans and Doubters]
iShares U.S. Home Construction ETF (NYSEArca: ITB)
YTD: Up 4.6%
Decline From 2006 High: Nearly 52%
Comment: As was previously noted, homebuilder ETFs were accurate predictors of the looming crisis because ITB started falling in 2006. ITB would essentially need to double from current levels to return to its 2006 highs. Depending on one’s point of view, that is either possible or unlikely on the basis that the ETF has more than doubled in the past two years. [Homebuilder ETFs Still a Far Cry From Old Highs]
SPDR S&P Homebuilders ETF (NYSEArca: XHB)
YTD: Up 15%
Decline From 2006 High: Almost 32%
Comment: Clearly, there are big differences between the recent performances of XHB and ITB. That has to do with XHB being more exposed to discretionary side of residential real estate rather than is ITB. Said another way, weakness in shares of homebuilders will take a great toll on ITB than it will on XHB.
Financial Select Sector SPDR (NYSEArca: XLF)
YTD: Up 27.3%
Decline From Pre-Crisis High: 43%
Comment: XLF is the choice here simply because it is the largest financial services ETF. Several of XLF’s rivals also reside health distances away from their pre-crisis highs. Confirming just how savagely repudiated bank stocks were in 2008 into early 2009, XLF is up 77.5% in the past two years and still needs to climb another 43% to get back to its 2007 high. There are no guarantees XLF will tack on another 43% soon, but financial services stocks and ETFs have shown encouraging signs as of late. [Big Bank ETF Boom Could be Imminent]