by on September 23, 2013
Fed taper talks and looming concerns over U.S. involvement in Syria managed to steal the headlines over the past few weeks as investors expressed their concerns over geopolitical tensions and upcoming monetary policy changes. The “herd” along with financial news media outlets are known for obsessing over “breaking news,” and as such, some might be rudely reminded over the coming weeks of a much larger, looming, unresolved economic issue; you guessed it, that pesky U.S. debt ceiling still hasn’t been “fixed” by Congress [see Visual Guide To Major Index returns by Year].
Less than one year ago, politicians on Capitol Hill were faced with steering the nation away from the much-feared “fiscal cliff” and policymakers successfully avoided a government shutdown by doing what they do best: kicking the can down the road. Call it deja vu if you like, but the fact of the matter is that Congress will once again be faced with our nation’s budget issues as the October 1st debt-ceiling approval deadline quickly approaches.
“Fiscal Cliff 2.0″ is coming, and while investors certainly shouldn’t panic over an issue that has loomed for years now, they might do well to look back at how Wall Street digested the Federal budget scare practically the same time one year ago. In fact, savvy traders may wish to take advantage of the upcoming drama in Washington D.C. seeing as how the stock market, as represented by the SPDR S&P 500 ETF (SPY, A), was quite active last year between 9/14 and 11/16; in that fairly short time frame, SPY sank upwards of 5%, creating a lucrative short-selling opportunity for some and an even better buying opportunity for others after the dust settled.
Below we highlight three ETF trades that turned in a solid positive performance last year between 9/14 and 11/16 while broad-based equity indexes took a nosedive. The ETFs profiled below may turn in another impressive performance this time around as budget talks heat up and political gridlock resurfaces; however, investors should keep in mind that history doesn’t always repeat itself word for word. Continue reading