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Consumer Goods And Services ETFs
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About Consumer Goods And Services ETFs |
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Consumer Goods and Services ETFs Overview and forecast
The domestic economic collapse did nothing for Consumer Goods and Services ETFs. Like the rest of the domestic sectors, this sector got flattened. The huge spikes in unemployment, and crash of private wealth, coupled with the credit crunch, effectively killed the heart of the sector.
Like retail, margins were hospitalized, and pricing was what was salable. Some real deflation was also to be seen lurking in the sales and discount specials. The value of asset bases was hurt badly, in any sense, and that, naturally, did no good to the bottom line of the corporations.
Unlike retail, consumer goods and services in an existing market can?t be put on hold or scaled back in a situation like the meltdown. They get physically reduced by whatever means available. The corporations physically shrank, as a result.
So did their stock prices. The ETFs, with rare exceptions, took hits of up to 56%. The average loss was in the 25-35% range. To give some idea of the level of volatility encountered, one ETF is showing in April of 2009 an increase of 52.48% in 3 months, and it?s still 0.8% in the red, over 12 months. Some of the others aren?t doing as well as that.
Consumer Goods and Services were on an all time high during the boom up to mid 2007, and the meltdown and credit crunch dug into a sector at its peak. The result was a spectacular dive, but this sector has a certain built in resilience. Goods and services are baseline business, and demand is basically good, depending on the availability of money. So even a slight recovery helps this sector directly.
Short term (2 months)
Until unemployment is under control, and some real life has been breathed back into the US economy by real business, Consumer Goods and Services will be relatively weak. In fairness, however, the sector has already done better than some others in terms of returns in value to ETF prices.
A modest improvement would be a reasonable expectation, barring any further shocks to the economy. The only real danger is a serious downturn in the domestic economy.
Medium (2 years)
Of all the basic economic sectors, Consumer Goods and Services is probably the best understood by the market, along with retail. Nobody?s guessing what?s going on in this sector, so the investment patterns are better informed, and tend to be hard nosed. The economy, if it?s showing any sign of life, will translate that life into business through the Consumer Goods and Services sector. In that sense, Consumer Goods and Services is a very basic component of most institutional and professional traders? investment portfolios- provided the returns are there.
The equation is that improving Consumer Goods and Services are considered good signs for business and the economy generally, but the sector has to perform, to quantify the values. Patchy performances aren?t considered trustworthy by the investment market, for obvious reasons. The sector will be considered one of the barometers of the recovery for later in 2009-2010.
Long term (5 years)
It?s a certainty, if that word can be used in any investment market, that Consumer Goods and Services will be building on demand based on real growth across GDP and basic business growth, and a recovery. The ?Consumer? in Consumer Goods and Services is an asset in terms of dollar values to the sector.
It?s possible to oversimplify the factors in Consumer Goods and Services investments. The actual business bases of the sector are diverse and extremely complex, and as the 2008 series of crashes showed, all of them had some impact on it.
Qualifier to projections
There is a possibility that the sector could remain oversold for a while, due to general skepticism of the state of the economy, and the natural mixing of signals across the primary indicators for Consumer Goods and Services.
However- The risks are real enough, even in a sector dealing with everything from staples to upmarket discretionary spending. Consumer Goods and Services is a staple investment across portfolios around the world, and even so, the horse?s teeth will be looked at long and hard before anyone decides to buy.
The possible downside for Consumer Goods and Services is a period of Japan-like stagflation in the US, where even if the wheels are turning, the economy goes nowhere, and the domestic conditions deteriorate.
This is the real skeleton in the closet for Consumer Goods and Services. Consumer goods and services thrive in straightforward, unencumbered economic environments. If the US economy, gigantic as it is, emulates Japan and stalls, Consumer Goods and Services will stall.
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Last Updated on: 2010-01-14 02:03:40 |
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