China equities have continued to underperform the broader market throughout the second half of 2011. The $6 billion iShares FTSE-Xinhua China 25 Index Fund (FXI) is down nearly 19% since the end of June compared to only a 2% decline for the S&P 500.
Equity investors continue to experience a roller coaster ride as a terrible run up to Thanksgiving was followed by a week significant gains in stock prices.
Stocks continued their run this week as investors once again embraced risk after the announcement of a preliminary European debt deal. Since September 22, the SPDR S&P 500 ETF (SPY) is up 14% while the Barclays Capital 20+ Year Treasury Bond Fund (TLT) is down 10% over the same time period.
In a wild 4 week period, stocks and US Treasury bonds have experienced double digit swings that resulted in the two asset classes ending about where they began.
Technology stocks have held up better than average in the highly volatile equity markets of the past few weeks. In the three months ended October 7, the Dow Jones U.S. Technology Sector Index Fund (IYW) is down 8%.
Uncertainty in Europe and China and a growing threat of a double-dip recession in the US has resulted in a rapid decline in the price of base metals.
As investors abandon stocks and precious metals, the US dollar has rallied. The PowerShares DB US Dollar Bullish Fund (UUP) is up over 3% in the past 3 months compared to a 11% decline in equities over the same time period.
Investors looking for an alternative to the volatile equity markets may want to consider corporate bonds. The PIMCO Investment Grade Corporate Bond Index Fund (CORP) is up nearly 3% in the past 3 months while equities have declined nearly 4% over the same time period.
Investors are pulling money out of European stocks and the French equity market has been particularly hard hit. In the past 3 months, the MSCI France Index Fund (EWQ) is down 28% compared to a 10% decline for the S&P 500 Index (SPY) over the same period.
Income investors have a new ETF choice with this week’s launch of a mortgage REIT fund by Van Eck Global (MORT). The ETF tracks an index of publicly traded mortgage REITS which make money not by investing in real estate, but by investing in mortgages.