Is the Trend, really your friend?

Looking back to 2012 the benchmark S&P 500 index returned nearly 13% over the year.  Even with all the drama around the fiscal cliff, various Euro debt scares, wars and other problems, the market shows us that ultimately it doesn’t matter.  The world, and the markets, go on regardless.  It seems the coast is clear so far in 2013 with only the debt ceiling debate coming up and interest rates remain exceptionally low.

We would like to revisit 2012 to see what performed well and what did poorly.   We want to see what could keep trending and what areas are poised for a comeback year.

Trend is your friend:

1. SPDR S&P Homebuilders (XHB)

This exchange traded fund follows a group of the best US homebuilders in the industry.  In 2012 this fund returned over 36% which absolutely dominated the S&P500.  We remain cautiously optimistic this fund has already been on a great run.  It is likely best to accumulate on dips.  A shortage of supply is increasing, thus giving further good news to homebuilders.

2. SPDR Financial Sector (XLF)

During 2012 this exchange trade fund returned 18% which beat the S&P500 gain of 13%.  It was a volatile year but as the fears dissipate the leading banks move up quickly.With money continuing to pour into the equity market and move away from defensive holdings, this should do well in 2013.

Big Losers:

1. Coal ETF (KOL)

This coal ETF lost nearly 30% its value in 2012 due to the drop in coal price around the world.  Whether it will bounce back this year or continue its downtrend remains to be seen.  We should stay on the side of caution as there is plenty of supply left in the market.

2. I-Shares US Utilities ETF (IDU)

Usually a top pick for defensive investors, this had a relatively lackluster performance in 2012 with a 3.5% gain in this fund.  With confidence flowing into the markets, we see it as having another underperforming 2013.

Possible Come backs:

1. I-Path Sugar ETF

A possible comeback story for 2013 as this fund lost nearly 18% last year.  Sugar prices have seemed to bottomed out and could move up into the summer months ahead.

2. China A Share Market:

The Shanghai index had a miserable 2012 losing nearly 10% in 2012 as we discuss in our blog post.

For true China A share market correlation you need a fund that has access to quota to directly invest in the Shanghai market.  These are rare for average investors, but we have access to one for our clients.  Contact us onadmin@caterergoodman.com or (021) 3366 1337 so we can help you.

Finally

We recommend remaining patient and doing plenty of due diligence and and consider your individual situation before any investment.  And of course, talk to your adviser.  Preferably us, of course.

Good luck out there!