Sub-Sector ETFs: Insurance, Aerospace, Steel Set for Revival?

There are less than 2 trading weeks to go and there are reasons to be optimistic. Half of the sector ETFs in the U.S. have climbed far enough off of their low points to meet the requirements for short-term uptrend status.

Yet the stragglers -- financials, technology, energy and materials -- are critical to any recovery. That makes it difficult to get unduly excited about a quick turnaround in the equity markets.

Nevertheless, the holiday spirit being what it is, I decided to dig deeper into the data. Intriguingly, I discovered nuggets of investor interest in some of the beaten-down sub-segment ETFs.

For instance, the Financial Select Sector SPDR (XLF) is down a whopping 58% from 1/01/08-12/19/08. Meanwhile, streetTracks Insurance (KIE) is making a comeback of sorts. It is up 7% over the past 8 weeks, whereas XLF is down 10% in the time frame. Moreover, KIE is 8% above its short-term trendline.

Technology is another area that has obliterated bull market hopefuls. The Select Technology SPDR (XLK) fell roughly 43% on the year through 12/19/08. And it is still struggling to get above its 50-day simple moving average.

Surprisingly, the Powershares Aerospace and Defense Fund (PPA) has been a bit rosier as of late. It is up 8.4% in the last 8 weeks, where broader tech was fairly flat. And PPA managed to enter its own near-term uptrend.

While it may seem counter-intuitive to invest in "security" with the new administration's economic restraints and political viewpoints, contrarian investors may be thinking otherwise. Moreover, PPA tracks the SPADE Defense Index -- an index that has outperformed the S&P in every year of the present decade.

If the bear destroyed the hopes and dreams of any wide-eyed investor, it may have been the most damaging to those who chose "stuff." Companies that acquire, garner, distribute basic materials had a phenomenal run in the bull market, then caved.

Materials are still languishing under the threat of a multi-year recession. Yet one material, alongside the companies whose businesses depend upon its use, has made a remarkable turn-about: steel.

Don't get me wrong here... steel companies have been battered for bigger losses than nearly any other sub-segment or broader segment of the overall economy.

Yet perhaps Obama's stated infrastructure goals have given the ultimate infrastructure metal a boost. After all, Market Vectors Steel ETF (SLX) has a 13.5% run-up in 8 weeks whereas the Basic Material Select SPDR (XLB) is actually down a "skosh."

If you'd like to learn more about ETF investing... then tune into "In the Money With Gary Gordon." You can listen to the show "live" or via podcast or on your iPod at this link.

Disclosure Statement: ETF Expert is a web log ("blog") that makes the world of ETFs easier to understand. Pacific Park Financial, Inc., a Registered Investment Advisor with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.