This Week In ETFs: December 4th Edition

by on December 4, 2011

Investors were in for wild ride this week as stock markets skyrocketed to record-high week levels not seen in almost three years. The Dow Jones Industrial Average peaked during Wednesday’s trading session, gaining a remarkable 490 points while the S&P jumped 4.3%. Major stock indexes continued to rally through the end of the week with the financial sector coming out on top as the biggest gainer. This latest surge was fueled by several substantial economic developments, including the coordinated actions of central banks to ease lending restrictions and positive U.S. employment data. The notion that the U.S. is finally gaining some momentum was supported by reports of unemployment dropping 0.4% from last month’s numbers and nonfarm payrolls rising by 120,000. Although these reports are a positive sign for U.S. recovery, economists attribute these good numbers to a shrinking of the labor force, meaning the labor markets will remain weak while the economy tries to push forward. Spurred by the positive U.S. employment data, gold and oil rallied earlier in the week only to have their gains curbed as the dollar grew stronger during Friday’s trading session [see also ETF Insider: Can The Bulls Hold On?].  

After last week’s Thanksgiving slow stretch, the ETF industry saw three new funds enter the market. UBS rolled out two ETNs that are designed to replicate a “risk on” and “risk off” investment strategy while State Street introduced their new investment grade floating rate ETF.

Below, we outline the best ETF stories from around the web this past week:

Investors: Don’t Keep the ETF Leftovers… at ETF Daily News:

With the rapidly expanding ETF industry, investors can now chose from over 1,300 exchange-traded products that cover just about every nook and cranny in the known investable universe. Although many of these funds have been extremely successful and have provided the markets with a new investment tool, some ETPs have either faltered or failed in this new competitive industry. In this article, author Ron Rowland discusses how and why some exchange-traded products are destined to make his “ETF Deathwatch” list.

ETF Inequality at IndexUniverse:

In the ETF industry, there are only a handful of ETFs that are considered to be a winner-take-all kind of product, meaning that while some ETFs hold huge assets, the majority are only able to pull in just a few million dollars worth. With the use of the well-known economic metric, the Gini coefficient, research shows that assets are very concentrated in the ETF market with about 85% of the industry’s total assets being held by just 5% of the funds. This article, by Devin Riley, explains how this significant asset concentration can affect the future of the ETF industry.

Back To Basics: 7 ETFs For Long-Term Investors at ETF Database:

When building a portfolio, investors are often focused on developing deep, broad-based exposure across a variety of asset classes that can produce long-term and steady returns. ETFs allow investors to access key corners of the global financial market with relative ease and cost-efficiency. There are hundreds of exchange-traded products that provide both hyper-targeted as well as broad-based exposure, which can be beneficial to investors with specific time horizons and investment objectives. In this article, author Stoyan Bojinov outlines 7 ETFs that can help investors implement a long-term strategy, as well as for those who wish to add diversification to their current portfolio.

 Disclosure: No positions at time of writing