Since ETFs merely track asset classes or stock sectors, what works in ETFland is what worked in the markets in general. ETFs that tracked income producing dividend stocks, such as utilities and consumer staples, did very well, as did funds tracking U.S. Treasurys, oil and gold. Meanwhile, emerging markets took a big hit this year, as did alternative energy and natural gas.
In deciding whom to read on what will be the trends next year, I looked to the place with the most appropriate name, ETF Trends. Here are ETF Trends’ top five predictions and the ETFs to track these trends.
Currency ETFs: With more investors seeking to hedge currency risk, as well as use currency to make a bet on the Eurozone debt crisis, currency ETFs should see a lot of action next year.
Emerging Markets took a bath this year, mostly from surging inflation. But the truth remains that the biggest growth will be found in emerging markets. Of course, a lot of that growth comes from selling to Europe and the U.S. and if those two areas fall into recession, we could see emerging markets fall furthers. Still, the valuations have come a lot from their lofty prices at the start of 2011. With clean balance sheets and a rising middle class, emerging markets look attractive and even if they fall some, this is where the action will be in the coming years.
Bonds are still going to be winners. With the Federal Reserve promising not to raise interest rates for another year, we won’t see a huge sell off in U.S. Treasurys. And with more potential problems in Europe, Treasurys will continue to profit from investors looking for safety. But with yields so low, it may be time to put more money into corporate debt, or even emerging market bonds.
Commodities and the falling dollar: While the dollar has risen lately, the broader trend remains down. Meanwhile, as people worry about massive money printing in Europe and the U.S., gold will come back, especially the SPDR Gold Shares (GLD).
While gold and gold ETFs rallied in 2011, surprisingly gold miner stocks tumbled. Typically, you see leverage in gold mining stocks, with moves three to four times the same direction as gold bullion. With David Einhorn thinking “that there is a major disconnect between miners and gold prices”, ETF Trends says Market Vectors Gold Miners (GDX) and Market Vectors Junior Gold Miners ETF (GDXJ) will move sharply higher in 2012.