9 ETFs And Sectors To Watch In 2009

The last year has been hectic one for stocks, exchange traded funds (ETFs), other securities and the overall market. We can only hope that 2009 will be a lot shinier. Where can we look for some potential surprises - good or bad?

Brett Arends of The Wall Street Journal gives us some areas to keep a close eye on in 2009, for better or for worse.

• Municipal Bonds: Some are paying as much as three times as much as Treasuries, on a taxable basis; they will either be a gold mine or a huge money pit. Take a look at the iShares S&P California Municipal Bond Fund (CMF), which has crossed both its 50- and 200-day moving averages.

• GAP (GPS) is a cheap retailer with a solid balance sheet, it is trading around six times cash flow and yielding 2.6%.  Perhaps take a look at Retail HLDRs (RTH) if you’d like exposure. GPS is 2.6%, and it has crossed its 50-day moving average.

• Long Treasury: Many investors have rushed into treasuries for their safety, but a 30-year yields a measly 2.63%; everything but Depression-style deflation will hurt these bonds. Keep an eye on the Vanguard Extended Duration Treasury ETF (EDV), which is above its 50- and 200-day moving averages.

• Precious Metals: Governments are borrowing and printing money like crazy, which is terrible for paper money and great for precious metals. Take a look at silver, a bit cheaper than gold, more specifically, the iShares Silver Trust (SLV), which has crossed over its 50-day moving average.

• Homebuilder stocks: If there is any recovery in the housing market, it may start with the homebuilders, which are still down 85% from their 2005 peaks, which history has shown as a good indicator to buy. Still - watch the trends. Recent history has shown that recent history doesn’t always apply. Take a look at the iShares Dow Jones U.S. Home Construction Index (ITB), closing in on its 50-day moving average.

• CGM Focus Fund (CGMFX): Fund legend Ken Heenber’s fund tanked this past year and it will be interesting to see how it performs over this new year. Mutual funds have taken a beating overall in 2008. Can they come back? Will investors want to go back? Keep an eye on this industry.

• US Geothermal Inc. (HTM): A leveraged alternative energy play that is high-risk and speculative; it has plenty of cash and is trading at about $0.70 per share. President-elect Barack Obama wants to make alternative energy a priority, which could benefit ETFs related to the sector. Market Vectors Global Alternative Energy (GEX) is a diversified play, and it has crossed its 50-day moving average.

• iShares MSCI EAFE Small Cap Index Fund (SCZ): some believe that the bargains can be found in small Japanese and European companies and it has crossed its 50-day moving average.

• Yen: Japan has been running a massive trade surplus and saving wads of cash, generally good things for a currency.  Keep an eye on the CurrencyShares Japanese Yen Trust (FXY) to see what it does this year. It’s above both its 50- and 200-day moving averages.

These are all great companies, sectors and funds to watch; unfortunately, no one can read into the crystal ball and tell us exactly how the market will play out. But this year could be an interesting one.

Disclaimer: Tom Lydon is a board member of Rydex Funds.

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