Predicting is hard—especially about the future, runs the old joke. But there’s no escaping forecasting in finance and economics. Even a passive investor has an assumption—a forecast! If you own an S&P 500 index fund, you’re assuming that you’ll earn an equity risk premium. Where did you get that idea? There are a thousand possibilities for thinking positively, but the key point here is that you’re anticipating a premium will come your way simply by holding risky assets.
Daily Archives: July 25, 2011
Tactical ETF Review: 7.25.2011
The budget talks in Washington are suffering from “gridlock” and so the risk of default still lurks. Meanwhile, the crisis facing the euro remains an evolving situation. But asset markets around the world don’t appear worried, at least as of Friday’s close. As our review below of ETF proxies for the major asset classes shows, buyers have had the upper hand recently. That’s a bit unnerving. Even in the best of times, a broad sweep higher in everything suggests there’s a correction brewing somewhere. That certainly looks like the case for U.S. stocks this morning: futures are reportedly “set to drop.” Meanwhile, here’s how the major asset classes stack up via representative ETFs through July 22…