Big Rotation Out of Gold, Emerging Markets, Small Caps? Be Prepared.

Includes: EEM, GLD
by: Mark Mahorney

In recent days there has been some serious pullbacks commodities and a number of hot sectors, led by falling gold prices. Commodities, international, emerging markets, Nasdaq, and Russell 2000 are all off substantially.

These sectors have produced great returns for the past couple of years, and you loved it. But, now you're on pins and needles, because you're looking at your portfolio and realizing that the percentage of your portfolio in these sectors has crept up.

It seemed like you had well-diversified smart strategy. You only did what Wall Street pundits told you to do because it made sense. If one does poorly, another should hold up. How can it be that they can all fall at once? It's the macro movement. Popular to unpopular. Popular to cash. Hot to cold.

The same people and firms bought emerging markets ETFs, stock in commodity related companies, and small capitalization U.S. companies. The hedge, mutual, and pension funds are loaded to the hilt with these hot sectors. Broadly labeled growth funds can hold foreign companies, commodities related stocks, ETFs, technology, or whatever. So they have a lot of flexibility when it comes to moving in and out of sectors.

Now's the time to review your portfolio and come back to reality about what you've got in there.