Monthly ETF Sector Reports
Here are some observations regarding the data that the ETF Sector Data website has been generating. As the months go by I'll return here and add any further observations I find with regards to sector valuations and sector rotation strategies.
December 2024
The site's Fear Index crept up again - this time to 16%. Christmas came and went and the Santa Rally never really showed up.
The three ETF Dogs for 2024 are confirmed as: Bulk Dry Shipping (BDRY), Solar Energy (BDRY) and Brazil (BDRY). The following two are: Rare Earth Metals (REMX) and Korean KPOP Music (KPOP). So are any of these worth investing in? Bulk Dry Shipping is famously cyclical and if you look at the long term stock prices of the underlying holdings they're not pretty. For example Teekay Tankers pretty much had a lost decade from 2015 to 2025. From 2015 to 2023 it would have returned a paltry 1.27% annualised return. Rare Earth Metals is also in a long term bear market and it turns out they're not even that rare. I'm not keen on Solar Energy or KPOP for that fact that they're not great picks if like me you're a fan of Lindy Effect Investing. This strategy prioritises investing in sectors and technologies that have been around for a long time. Although KPOP is likely to stick around for the long term, unfortunately it's been a generally bad year to have invested in South Korea. It could be a good contrarian pick though. The only ETF in the 2024 Dogs list I have personally invested in is Brazil. It's famously cyclical and should (in theory) recover at some point. Mexico and Latin America in general could also do well in 2025 through to 2026.
My portfolio had a volatile December, with the largest drawdown 2.4%. I continued to buy stocks and ETFs at both 52 week and 50 day lows. In December I added 50 day low charting capabilities to this site. Investors generally aren't so aware of 50 day lows compared to the infamous 52 week lows. Yet my backtesting results suggest that buying 50 day lows of quality stocks does lead to even greater returns compared to buying 52 week lows. I believe this is down to it being more likely that the highest quality stocks are much more likely to reach 50 day lows compared to 52 week lows. Incidentally I am largely buying individual stocks rather than ETFs. My backtesting has shown that it's really difficult to generate market beating returns by buying ETFs. It is however much easier to beat the market by buying high quality individual stocks. I do still make extensive use of the data on this website though. It's great for pinpointing out of favour sectors. For example, the Materials Sector (XLB) is currently putting in a series of 50 day lows and it seems likely it will reach a 52 week low. I have been buying up many of the underlying S&P500 stocks in this ETF. Many are in long term uptrends and pay attractive dividends.
What I also like about buying stocks at 52 week or 50 day lows is that it is making me buy stocks when the general market has down days. It's definitely a great strategy if you want attractive entry points into the market. Over time I've also learnt to recognise good buying days by the number of 52 week lows that appear, and also the quality of stocks and ETFs putting in new 50 day lows.
November 2024
The site's Fear Index crept up to 9.8% but markets generally had a very good month. Love or hate the Orange Man, you can't deny that markets love the stability that a comprehensive election result brings. A few interesting ETFs put in new 52 week lows. I bought into France and would have bought Finland but the ETF wasn't available in my trading account. I also bought Latin America, Brazil and Mexico ETFs. These are amongst 2024's dogs but it's highly likely they will bounce in 2025. It was also a bad month generally for green energy, with solar and wind putting in new 52 week lows.
It was a better month for crypto and other "junk" - in fact the Crypto Industry ETF leapt to the top of the performance leaderboard with a stunning 66% year to date gain. How long this lasts remains to be seen. In fact stocks in generally seem to be retesting bubble territory. I would say the canary in the coal mine is the Dry Bulk Shipping ETF appearing in the worst performers list. If the global economy is so strong why are people shipping less food and raw materials around the globe?
Personally I had a pretty good month. I'm now testing buying 52 week lows using real money. My largely UK focused trading account is up 2.9% on the month. If the bargain basement UK retail stocks have a good or even a satisfactory Christmas period then they should soar.
October 2024
October 2024 saw a huge rally in precious metals, with most of the attention focused on gold. My YouTube feed is now full of gold is going to $3000 / $30,000 / $300,000 type videos. The goldbugs may yet have their day. However, if you analyse the data on ETF Sector Data then you'll soon find out the best performing sector in one year is rarely the best performer in the next. More often than not, it crashes and burns.
Investors generally remained bullish throughout what has historically been a bad month for risk assets. The ETF Sector Data fear gauge (on the home page) ticked up a little, but only to 1.3%. There were very few new 52 week lows recorded by ETFs over the cource of the month. Solar Energy and Oil Refiners both recorded new lows, so it's possible they might be due for a rebound in 2025.
As for the ETF Sector Data website itself, I have begun testing the 52 week low buying strategy using real money. I've mostly been buying individual stocks because so few ETFs have recorded 52 week lows lately. This strategy looks promising and the backtest results are very encouraging. For licensing reasons I can only show data from 2021 onwards on this website, but the strategy had now been privately tested all the way back to the mid 1980's for certain stocks. The most important criterion for success appears to be the quality of the stock/ETF itself.
September 2024
September 2023 was a disaster for many investors, with all 11 main US market sectors down, except for energy. September 2024 was surprisingly robust given the month's reputation as being particularly volatile (especially to the downside).
September 2024 has turned into kind of a contradictory month. Utilities (5.39%) were up and Energy (2.9%) was down, which indicates we're in late cycle and heading towards recession. On the other hand Consumer Discretionary (7.64%) massively outperformed Consumer Staples (0.59%), and Healthcare (2.46%) struggled.
One sector that seems to be under the radar is Basic Materials (4.32%). This sector had a decent month. The soaring price of gold helped several of the major constituents of the underlying ETF. But more mundane chemicals seem to be having a modest resurgence. Does this mark the start of a new round of inflation? If it does then markets will almost certainly be smashed lower as we look to be heading into a rerun of the 1970's. Maybe this is why Financials (0.77%) appear to have run out of steam this month.