iShares Dow Jones US Home Const. (NYSEARCA:ITB) One of 2012’s shining starts among sector and sub-sector ETFs is the iShares Dow Jones US Home Construction Index Fund. iShares Dow Jones US Home Const. (NYSEARCA:ITB) has surged 81.2 percent this year. That run has been buoyed by a steady stream of less bad/decent housing data, including this data point delivered Tuesday: The National Association of Home Builders said its NAHB/Wells Fargo Housing Market index of home builder sentiment jumped to 47 this month from a revised 45 last month. Economists expected a December reading of 47. The December reading is the best since April 2006
During iShares Dow Jones US Home Const. (NYSEARCA:ITB)’s ascent, the battle cry of the unknowing has been the ETF is overbought. In reality, every decent dip the fund has endured this year has been a buying opportunity. iShares Dow Jones US Home Const. (NYSEARCA:ITB) faces two tests in the new year. First, can the ETF keep moving higher even after an 81 percent gain?
Second, the equity market is believed to be a forward-looking indicator. Theoretically, that means iShares Dow Jones US Home Const. (NYSEARCA:ITB) has told investors the housing market could improve in earnest and do so soon. How the ETF responds to a truly bullish residential real estate market remains to be seen.
Market Vectors Gold Miners (NYSEARCA:GDX) Gold is poised to extend its annual winning streak to 12 consecutive years, but it is doubtful mining ETFs will get in on that act. In other words, barring a significant late-year turnaround, 2012 will be another year in which gold mining ETFs have proven vexing for investors even as gold has moved higher.
Looking to 2013, there are some reasons why investors might find GDX and its components alluring. Decent valuations standout as one reason. The thesis, albeit flawed, that eventually the miners must start following gold higher is another. Neither is a truly compelling reason to be early to the gold miners. As Citigroup notes, diversified miners such as Rio Tinto plc (NYSE:RIO) are offering even better valuations than gold extractors.
Amid rising costs and a rising reputation for frustration and being a group of laggards, gold miners have a lot to prove to investors before this group can be considered anything more than useful as a short-term trade.
Utilities SPDR (NYSEARCA:XLU) Or any U.S.-focused utilities ETF for that matter. There are nine select sector SPDRs ETFs and Utilities SPDR (NYSEARCA:XLU) has been the dog of that group in 2012 with a modest year-to-date loss. Many investors that are aware of the savage repudiation endured by Utilities SPDR (NYSEARCA:XLU) in recent weeks are pointing to fiscal cliff fears as a primary reason for the fund’s doldrums.
That is not an inaccurate assessment. Utilities are viewed as a dividend sectors and many dividend stocks and ETFs have been punished by fiscal cliff headlines. However, a case can be made that rich valuations have finally caught up with XLU and its holdings, a problem that was highlighted in June.
