If you do believe the U.S. economy is part of a worldwide economy, are you bothered by capital depreciation across the commodity space? U.S. equities thrived alongside commodity demand in the previous decade; they faltered in the absence of that demand during the two previous recessions. Is the downtrend for PowerShares DB Commodity Tracking Index Fund (DBC) perplexing in any shape or form?
Analysts at SG Securities estimate that corporations spent 20% last quarter on share buybacks. Recognizing that share buybacks reduce supply – understanding that corporate purchases have been a part of the demand side of the equation – does the change ring any alarm bells? There are scores of different methods for determining whether stocks are undervalued, fairly values or overvalued. Most of those methods scream overvaluation. Why should an investor with cash on hand add more U.S. equity exposure when tired-and-true metrics suggest waiting for cheaper prices?
Some stock bulls have argued that we are in the pre-season of a merger-and-acquisition phase. Moreover, with the biggest banks profiting from their government-infused capital structure, one might reasonably assume that regional banks would benefit from takeover fever. Heck, shouldn’t shares of regional banks be surging on the “healthy” demand for real estate? Yet SPDR KBW Regional Banking (KRE) is not showing any stamina.
Having asked so many questions of U.S. stock ETF bulls, one might erroneously assume that I am bearish. On the contrary. Until large-cap stock ETFs in the S&P 500 fall below a 200-day moving average, the trend suggests that one should participate. Yet throughout the year, I have drilled home two key points: (1) Use a barbell approach and (2) Have a sell strategy in place. The ETFs that I am using for that barbell include Vanguard Extended Duration (EDV) and iShares USA Minimum Volatility (USMV).