Weather The September Price Swings With These 5 ETFs

Includes: CVY, HYG, PCY, PFXF, REM
by: Gary Gordon

I am a rabid New York Giants football fan. So with the reigning Superbowl champs laying an egg by losing last night’s season opener, I may be a tad grumpy.

What makes me even grumpier is the flipping-n-flopping on the part of media professionals ... both in sports and in finance. For example, prior to the Giants-Cowboys event, prognosticators explained that the Dallas Cowboys quarterback struggles with inconsistent play and that he would fail to throw completions to a banged-up corps of receivers. After the Cowboys victory, though, the very same analysts heralded the masterful skills of a top-tier quarterback in Tony Romo, while simultaneously lauding the abilities of the previously maligned pass catchers.

So what does this have to do with high finance? As the S&P 500 hits a 4 1/2 year high on Thursday (9/6/2012), pundits are quickly dismissing market risks to appear as though they have always been “in sync” with the stock market rally.

Specifically, the European Central Bank’s (ECB) plan for bond purchases had been telegraphed/leaked for months. Had the market “sold off” on the news, many would have talked about it as having been “priced in.” Instead, as the rally powered forward, the fortune-tellers now describe the ECB plan as a bonafide “game changer.”

Did the risk of Spain balking at austerity conditions in exchange for a bond bailout suddenly disappear? Did the risk of German courts ruling against the constitutionality of ECB bond purchases dissipate? The only real game changer is the ultra-positive reaction by the investment markets themselves ... and that may turn out to be short-lived.

Similarly, there are folks who expressed that ... for stocks to continue trending upward ... the Federal Reserve would need to enact QE3 stimulus at its upcoming FOMC meeting. With 200,000 private payroll numbers from ADP data, greater-than-anticipated expansion of the U.S. economy’s service sector, as well as a modest drop in new jobless claims, the Fed is far less likely to kick off another round of quantitative easing before the November election.

So why aren’t these same folks expressing greater concern about market direction rather than bandwagoning the new stock highs? Once again, the fickle flip-flopping is most likely associated with a need to be viewed as “in step” with the markets.

I am keenly aware that risk assets have the capacity to climb the “wall of worry.” By the same token, I am acutely cognizant that selling higher and buying lower is quite desirable.

In truth, I am neither bullish nor bearish here. The probability of the market taking a breather for the smallest of reasons makes it important to take some profits and raise a bit of cash. Still, I am less inclined to sell “risk-neutral” assets that produce an income stream.

It follows that five top client holdings (as of September 6, 2012) are genuine income generators. With intra-day price swings likely to pick up over the next 10 weeks, be sure to employ stop-limits or hedges for any buy order.

5 “All Weather” ETFs For September of 2012
1 Month %
iShares FTSE NAREIT Mortgage REIT (BATS:REM) 5.7%
Guggenheim Multi-Asset Income (NYSEARCA:CVY) 1.6%
Market Vectors Preferred Ex Financials (NYSEARCA:PFXF) 1.5%
iShares iBoxx High Yield (NYSEARCA:HYG) 1.4%
PowerShares Emerging Market Sovereign (NYSEARCA:PCY) 1.0%
SPDR S&P 500 Trust (NYSEARCA:SPY) 2.2%

Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships.