Why the Bears Are Wrong About ETFs and the Markets

Apr. 2.10 | About: SPDR S&P (SPY)

Since the S&P 500 touched a low on March 9, 2009, we’ve witnessed a nice rally in the markets and exchange traded funds (ETFs). The bears and skeptics, however, still abound. Who’s right? Who’s wrong?

The markets are up around 75% off their lows last year. However, there’s a widening gap between the housing and stock markets, giving the bears cause to believe that another downturn is in the offing.

James Altucher for Tech Ticker explains why he disagrees:

  • Lots of homes are in foreclosure or under water: Despite this, the Case-Shiller index has been up the past six months, a hint that prices are stabilizing.
  • All the growth we’re seeing is just inventory rebuild: Now businesses are scrambling to restock, spurring growth in the economy that could continue for a couple more years.
  • Unemployment is 9.7%: But other jobs data show a rise in part-time hours, hourly pay, hours per week, and number of temporary workers. And these are all precursors to gains in full-time jobs.

Altucher also predicts that the S&P will see 1,300 by the end of this year.

We’ve noticed the improvements, too. Factory orders are up, the rate of job losses is slowing and the Federal Reserve is keeping interest rates low in order to keep it moving. These are all certainly promising developments.

Whether the S&P 500 soars to new highs or not, wait to see what the reality is before you take a position. Don’t base your investments on predictions; this economy can still deliver an element of surprise. ETF investors must be ready with a trend following plan and be on alert to implement it when necessary.

  • SPDR S&P 500 (NYSEArca: SPY)