On September 3, in Playing Defense With ETFs, we looked at some funds that could be used for playing defense against a market decline. Several funds were discussed, including Guggenheim Defensive Equity (NYSEARCA:DEF), SPDR Healthcare Select Sect ETF (NYSEARCA:XLV), PowerShares DB U.S. Dollar Bullish Fund (NYSEARCA:UUP), SPDR Gold Shares (NYSEARCA:GLD), iShares 7-10 Year Treasury (NYSEARCA:IEF) and iShares Barclays 20+ Year Treasury (NYSEARCA:TLT).
Let's look at how these funds performed between September 3 and October 17. The SPDR S&P 500 (NYSEARCA:SPY) fell 5.56 percent over this period. ProShares Short S&P 500 (NYSEARCA:SH) gained 5.50 percent.
DEF fell 5.99 percent, worse than SPY. One thing that hurt DEF is the nearly 20 percent of assets in energy, which was the hardest hit sector over the past month.
SPDR Healthcare also lost ground, sliding 4.26 percent. SPDR Utilities (NYSEARCA:XLU), another defensive sector, actually went up, a surprisingly strong showing for the fund
Was that really a breakout? With the S&P 500 struggling around the 2,000 level for the past two weeks, Friday's strong finish might seem like a bullish breakout. But the market has already given us a couple of false breakouts at this level, and although I see higher prices ahead, I'm still not convinced that we have seen all the near-term downside that Mr. Market has in store, particularly given we are now in the historically weak month of September. Also, the improving economy is a double-edged sword from an equity investor's perspective as they are concerned that the Fed might feel the need to raise rates sooner than currently planned.
In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some
There's isn't a single definition of defensive stocks, but most investors agree that defensive stocks are those in non-cyclical industries such as consumer staples, healthcare and utilities. Defensive stocks also include those stocks with relatively high dividends, which makes them attractive to income-oriented investors who are likely to hold through a bear market. Defensive stocks are supposed to outperform during market corrections
Defensive stocks are predicted to perform better during the late stages of a bull market when investors rotate out of cyclical sectors and into non-cyclical sectors. The argument is that investors sell one sector with volatile earnings tied to the business cycle, such as energy, and buy another with more stable earnings, such as healthcare. There is another argument that says defensive shares perform better not due to investor buying, but a lack of selling. Investors dump their cyclical shares ahead of and during a correction, but hang