- Written by Michael Vermillion
- Monday, 25 August 2008
2008 has been a tough year for U.S. equity investors. Despite a 10% decline in the S&P 500 since the beginning of the year, high oil prices, reeling credit markets, renewed signs of inflation and a slowing global economy have combined to make the outlook more uncertain than ever.
Where can investors find safe harbor until the storm blows over?
We took a look at year to date performance by industry, and found 5 sectors that have recovered to or even surpassed their January levels. Our recommendations all point to Exchange Traded Funds (ETFs), since that is our primary focus at ETF MarketPro .
Water (+2% YTD)
Water is a long term growth industry and tends to be less cyclical than other utilities. As a result, domestic water ETFs haven't gone up much but haven't gone down either. The First Trust ISE Water Index Fund (FIW) holds the top 36 domestic companies in the industry including Tetra Tech (TTEK) and Pentair (PNR). The PowerShares Water Resources Portfolio (PHO) is a modified equal-weighted portfolio of leading water companies including Tetra Tech and Itron (ITRI).
For more on Water ETFs, see the ETF MarketPro theme guide - Investing in Water with ETFs .
Consumer Staples (flat YTD)
With positions in companies such as Procter & Gamble (PG), Wal-Mart (WMT), Coca-Cola (KO) and Phillip Morris (PM), the consumer staples ETFs have steadily held their ground even during the sharp market sell-off at the beginning of the year.
The Vanguard Consumer Staples ETF (VDC) and Consumer Staples Select Sector SPDR Fund (XLP) are the two largest Consumer Staples ETFs.
Software (-2% YTD)
When the economy slows, big companies focus on productivity. Replacing employees with software is a time-tested way to achieve productivity gains and the software sector is benefiting.
The S&P North American Technology-Software Sector Index Fund (IGV) has large positions in major software companies such as Adobe (ADBE), Oracle (ORCL) and Symantec (SYMC).
Biotech (+10% YTD)
Consolidation in the Biotech sector has driven stocks higher recently continuing a recovery that began back in March. The SPDR S&P Biotech ETF (XBI), and Nasdaq Biotechnology Index Fund (IBB) hold companies like Amgen (AMGN), Gilead (GILD) and Teva (TEVA).
XBI has outperformed IBB of late due to a stake in Genentech (DNA) which is an NYSE stock.
Transports (+10% YTD)
The overall rise in oil prices has actually helped the transports sector more than hurt it. The dominant presence of the large railroads has tempered the swings from package delivery companies Fedex (FDX) and UPS (UPS).
The Dow Jones Transportation Average Index Fund (IYT) also includes the airlines, but the collective market cap of this part of the industry is too small to impact the overall average. The largest airline holding in the Index is Southwest Airlines (LUV) at #16.