Reasons There’s Hope Yet For A Global ETF Recovery

It’s ugly out there for global exchange traded fund (ETFs), and today it got even uglier. Look at Japan’s Nikkei (^N225): it’s now below its 1985 level.

That means if you had bought the index back than and held on through all this time, you’re now in the red. In fact, few economies around the world are getting spared from the carnage right now.

Both developed and emerging markets are being hit badly as investors sell off their stocks and cause major indexes to sink.

But the global economy may have the potential shock many with its resiliency, and the “Second Great Depression” many of us fear is around the corner may never happen.

Jim Wiandt for Index Universe has five reasons the global market slump may already be straightening out sooner rather than later. The economic slowdown is not over yet, by any means, but there are sign of life amidst the wreckage already.

• Credit spreads are coming in. Both the TED spreads and LIBOR rates are on the mend and thees are the key elements that must be healthy before any recovery starts. The billions in the government recovery package must be doing its job.
• The U.S. dollar is rebounding. The US will be the one to lead the recovery out of the economic slump, so the dollar’s latest surge is proof that markets still see the U.S. as a haven.
• Commodities are sputtering. Lower energy and commodity prices are what we need right now to help put back balance on supply and demand. Gold has also stalled which is a possible indication that the masses do not think a recession is looming.
• Real estate is becoming real again,while other asset classes play catch up. Prices coming back down on real estate is healthy and necessary for the economy to be productive again, Credit prospects are also more realistic.
• The money is waiting for a place to go. Once the system is in tack there is plenty of money waiting to find those bargains and it will replenish the system once the bottom has been hit.

This doesn’t mean the volatility is over, but there are some glimmers of hope in here.

Posted in Categories: Contributor, ETFs, External Research, Japan, Stocks, USA.

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