The Shifting Tides of the Third Quarter
I’m a surfer, and it’s a sport I’ve been doing since I was a kid. To be a good surfer, you need to know how to read the sea. That means you need to know when the sets are likely to be best, what the water temperature is and, perhaps most importantly, when the tide changes.
When it comes to your money, similar knowledge makes you a better investor. The difference is you want to know when there’s a significant change in the tide of what’s working and what’s not working.
During the third quarter, stocks in the emerging markets really began to see a tide change. The iShares MSCI Emerging Markets Index ETF (EEM) was down nearly 4% in Q3 and plunged 7.8% in September alone.
In addition to emerging markets, there also has been a changing of the tides in commodities, as well as in U.S. small-cap stocks of the sort in the Russell 2000. The chart here of the iShares Russell 2000 Index (IWM) ETF clearly shows the bearish trend in this market segment.
Even large-cap equities have begun to falter during the past couple of weeks, but the major averages still were firmly in the black when the final tally on Q3 was made.
So, where were the waves the highest in Q3, and where were the seas the roughest? The two tables below tell us where the swells were best, and where things were completely washed out.
Top 10 Winners in Q3
| Ticker | Name | % Gain |
|---|---|---|
| ASHS | Deutsche X-Trackers Harvest | 33.69 |
| ASDR | Velocityshares Emerging Asia | 29.73 |
| QAT | iShares MSCI Qatar CP ETF | 20.09 |
| UAE | iShares MSCI UAE Capped ETF | 17.22 |
| EUO | UltraShort Euro ProShares | 17.13 |
| YCS | UltraShort Yen ProShares | 16.77 |
| KBA | Kranesh Bosera MSCI China A | 16.24 |
| PEK | Market Vectors China ETF | 15.71 |
| ASHR | DB Harvest CSI 300 China A | 14.69 |
| GULF | WisdomTree Middle East Dividend | 14.16 |
Top 10 Losers in Q3
| Ticker | Name | % Gain |
|---|---|---|
| SIL | Global X Silver Miners ETF | -25.32 |
| SILJ | Purefunds ISE Junior SIL-ETF | -25.25 |
| FCG | First Trust ISE-Revere Natural Gas | -24.15 |
| GGGG | Global X Pure Gold Miners ETF | -23.00 |
| CORN | Teucrium Corn Fund | -22.60 |
| SLVP | iShares MSCI Global Silver Miners Fund | -22.12 |
| GLDX | Global X Gold Explorers ETF | -21.88 |
| WEAT | Teucrium Wheat Fund | -21.61 |
| DBS | PowerShares DB Silver Fund | -20.77 |
| PSCE | PowerShares S&P SmallCap Energy | -20.57 |
In the winners column we see investing in China A-shares, Asian emerging markets and shorting the euro and the yen were good strategies during the quarter. Strategies to avoid were buying silver, mining stocks, natural gas and corn and wheat commodity funds.
As for Q4, it appears that we are entering a much-overdue correction period, as well as a period of slowing global growth. The decline in commodities during the past three months certainly supports this global slowdown thesis.
When the tides change, smart surfers know it’s time to get out of the water. We’ve done just that on the investing seas of late, as we have made many adjustments during the past two weeks to the portfolio holdings in my Successful ETF Investing newsletter.
I expect further adjustments in the near future, especially if the selling tide continues to flood into shore. So, if you are trying to figure out what to do with your money right now, I invite you to check out Successful ETF Investing today.
Jim Woods is a 30-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor.
His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. Read more about Jim Woods.
