ETF Investments for the Current Fed Climate

by: Gary Gordon

Corporate resilience has been rather amazing. Bottom-line, top-line… who really thinks that companies aren’t hanging tough?

Apparently, with so many corporations doing markedly better, some market-watchers fear that the Fed may show too much faith in the overall economy’s standing. That is, would the Fed prepare a statement that hinted at a foreseeable end to near-zero short-term rates?

Not a chance.

The Fed had to “extend” the buying of long-term U.S. Treasuries into October from an original end date of September, a la quantitative easing. They’re not about to become inflation hawks with unemployment still rising.

For better or worse, the Fed will keep target rates right where they are for “an extended period.” In fact, the Fed has a long history of overshooting in both directions, so the smart money is on the Fed staying the exact same course. And that means the wording of the statement won’t change discernibly.

What does that mean for the ETF investor? You should expect the dollar to weaken, commodities to rise and stocks to rejoice. You should expect Brazil (NYSEARCA:EWZ) , Australia (NYSEARCA:EWA) , Chile (NYSEARCA:ECH) , Korea (NYSEARCA:EWY) , Metal Miners (NYSEARCA:XME), Global Energy (NYSEARCA:IXC), Copper (NYSEARCA:JJC), Gold (NYSEARCA:GLD) and Commodities (NYSEARCA:GCC) to finish 2009 in a better place.

I’m not saying that a correction would end simply because the Fed will stand “pat.” I am saying that the reduced uncertainty about the Fed’s direction will eventually cause wear/tear on the bears and, eventually, prompt buyers to re-enter the mix.

So what investments should you be thinking about?

1. Chile and Copper demonstrate that the world’s far from falling apart.

2. Brazil, Australia and Gold Miners are international funds that will ultimately benefit as the pullback becomes a “pull-up.”

3. And there are Q4 ETFs that are tailor-made for the “stand-pat Fed” and a weaker U.S. dollar. Here are 3 that may be intriguing to you.

Full Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. The company may hold positions in the ETFs, mutual funds and/or index funds mentioned above.