January’s Not-So-Pretty Domestic ETF Picture

The final week of January ushered in a host of corporate earnings reports and, for the most part, those earnings were a mixed bag.

Some big names did well, handily beating Wall Street expectations, such as D.R. Horton (DHI), Boeing (BA) and Apple (AAPL), while other well known names fared poorly, including Caterpillar (CAT), Ford (F) and Procter & Gamble (PG). Still others came in with mixed results, notching higher revenue but a lower-than-anticipated bottom line. The biggest company of this sort was Microsoft (MSFT).

The main reaction to earnings this week was decidedly bearish, as stocks sold off hard, driving the major domestic averages firmly into the red for January, as well as for the year to date.

As of Thursday’s close on Jan. 29, the Dow Jones Industrial Average was down 2.28% year to date, while the S&P 500 was off by 1.83%. The NASDAQ Composite was off 1.11%, while large-cap techs in the NASDAQ 100 were down 1.30%.

The chart here of the PowerShares QQQ Trust (QQQ), the exchange-traded fund (ETF) that mirrors the NASDAQ 100, shows January volatility in the segment.

By contrast, the benchmark international ETF, the iShares MSCI EAFE Index Fund (EFA), is up 2.24% year to date. The chart here illustrates the big price spike in January.

When the year began, I told subscribers to my Successful ETF Investing newsletter that what often happens in markets is that last year’s losers become this year’s winners. (For more on this situation, I address it today in my write-up about “4 Deeper Ways to Be a Better ETF Investor in 2015.”)

So far, we’ve seen this theme operating in domestic stocks vs. international stocks. I am actually of the opinion that international stocks will outperform U.S. stocks in 2015. So, if your portfolio doesn’t have much global equity exposure right now, I think it’s prudent to consider adding some.

If you want advice about specific recommendations on how to take advantage of last year’s losers becoming this year’s winners, check out the Successful ETF Investing newsletter today.