Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Should You Rethink Your Exposure To High Beta ETFs?

By Pacific Park Financial Inc. (Gary Gordon)ETFsJun 04, 2013 04:21AM ET
Should You Rethink Your Exposure To High Beta ETFs?
By Pacific Park Financial Inc. (Gary Gordon)   |  Jun 04, 2013 04:21AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

The possibility of the Federal Reserve slowing its bond purchasing program sent interest rates rocketing in May. Rate-sensitive assets — dividend stocks, REITs, MLPs, preferreds, muni bonds — all began to depreciate in value. By the end of the month even common stocks began to stammer.

Here on the first trading day of June, however, the Institute of Supply Management (ISM) offered up its assessment of U.S. manufacturers. Not only did the manufacturing sector shrink for the first time since November, the data point represented the worst reading in 4 years.

In the same manner that bad news continues to be good news, the Dow and the S&P 500 surged higher. Clearly, there isn’t a snowball’s chance in Death Valley that the Federal Reserve will taper its quantitative easing (QE). On the other hand, what should ETF investors take away from the clear evidence that economic output is waning?

Stocks Really Finished
Stocks Really Finished

Less than a week ago, scores of commentators began discussing the best way to invest in the current environment. They advised shifting from non-cyclical stock assets to cyclical stocks like those in the banking and tech sectors. The reasoning? Not only did the month-over-month numbers show evidence of sector rotation, but rising rates were supposedly a sign of a strengthening U.S. economy.

Today, however, there will be less talk of a resilient economic backdrop and more talk of a summertime slowdown. And until the Fed fully commits to the same amount of QE, or perhaps a bump higher in its monthly bond purchasing, stock assets might struggle for definitive direction as well.
Granted, SPDR Industrials (XLI) and SPDR Materials (XLB) were phenomenal in May. Financial shares could do no wrong. And “”Risk On” was in complete control of the cockpit.

On the other hand, can high beta, higher risk assets prosper if the world economy continues to falter? The European Union entered its 6th consecutive recessionary quarter, India reported its slowest gross domestic product (GDP) in a decade, manufacturing in China is contracting and Japan’s rapid currency devaluation is creating sovereign debt concerns.

The solution remains the same as it has for most of 2013. Specifically, ETFs less tethered to economic uncertainty are better able to ride out increasing market volatility. Funds like SPDR Select Health Care (XLV) and iShares DJ Consumer Goods (Staples) are providing equal or better reward for less risk.

In addition, dividend investing did not die with its setback in May. As long as the Fed recommits to its QE (and let’s face it… tapering talk was little more than a trial balloon), high dividend equity payers from the non-cyclical sectors will remain desirable. For instance, iShares High Dividend Equity (HDV) focuses largely on health care corporations and telecom. Moreover, this exchange-traded tracker appears to have strong support at its 50-day trendline.


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.

Should You Rethink Your Exposure To High Beta ETFs?

Related Articles

Should You Rethink Your Exposure To High Beta ETFs?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email