My Market Pullback ETF Wish-List [Podcast]

The act of saving may tell us more about how Americans feel about the economy than what they say. Specifically, in November of 2011, Americans were saving at a 3.5% rate. By December 2011, that number jumped to 4.0%.

What’s more, in spite of record low mortgage rates, home prices across key metropolitan areas are still depreciating. If the U.S. does not get a corresponding pop in real estate, Americans aren’t likely to benefit from the “wealth effect” – a powerful driver of consumption.

And then there’s the wallet-emptying experience at the gas pump. Data show that $100+ per barrel causes shifts in driving habits and air travel plans. In fact, rising petroleum-based product costs (e.g., diesel, gasoline, jet fuel, etc.) may also cause transporters to transport less goods.

Not sure? Investors certainly think so. The iShares DJ Transportation Fund (IYT) is one of the few domestic stock funds below its 50-day moving average. (Note: Additionally, the DJ Transports is diverging from the DJ Industrials, which Dow Theory proponents regard as a bad omen for U.S. stocks.)

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Of course, there are other disconcerting drags on the U.S. economy. Europe's service sector recently logged a recessionary PMI below 50. Economic contraction in Europe can certainly drag on U.S. growth.

Granted, the ever-changing outlook for the U.S. economy does not move in lock-step with stock prices. Even if corporate profits stagnated in 2012, higher stock prices would still be justified on a price-to-earnings (P/E) basis.

Nevertheless, if you have cash on the sidelines, the most sensible thing to do is to wait. Resist the siren call to “buy, buy, buy” as the Dow eclipses 13000. Rather, wait for the opportunity to buy lower.

What’s on my “wait-for-it” wish list? If the U.S. economy weakens just enough to resurrect Republican calls for more drilling, the currently overbought iShares DJ Oil & Exploration Fund (IEO) would be an attractive candidate. I also favor iShares DJ Medical Devices (IHI) for the uncertain economic environment. With knee replacements in the 45-64 age bracket tripling over the so-called lost decade, expect boomers to find the ways and means to pay for the medical fixes they covet.

Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships.