Many investors and advisors know that ETFs are not only a low-cost, effective means of capturing the performance of almost any segment of the market, they are also powerful tools for monitoring market trends. This dual purpose of ETFs is where etf.com’s Markets Monitor comes in as a powerful tool.
Learn more about how ETFs can be used to monitor market trends and how the Markets Monitor tool efficiently fills this need for investors and advisors.
How Can Investors Use ETFs to Monitor Market Trends?
Investors can use exchange-traded funds as a tool to monitor stock market trends in several ways, including sector rotation trends, market index tracking, style investing, international markets and technical analysis.
Here are a few common ways investors use ETFs to monitor market trends:
Sector rotation: ETFs offer exposure to various sectors, such as technology, healthcare or energy. By monitoring the performance of sector-specific ETFs, investors can gauge the relative strength or weakness of different sectors within the stock market. If a particular sector ETF consistently outperforms others, it may indicate a trend of market leadership, providing insight into the overall market sentiment.
Market index tracking: ETFs often track specific market indexes, such as the S&P 500, Dow Jones Industrial Average or Nasdaq Composite. By monitoring the performance of these ETFs, investors can get a sense of the overall market trend. If the ETFs that track these indexes are consistently rising, it generally suggests a bullish market sentiment, while declines may indicate a bearish sentiment.
Style investing: ETFs can also be categorized based on investment styles, such as growth or value, or by factors, such as momentum or volatility. Investors can monitor the performance of growth-oriented ETFs relative to value-oriented ETFs to gain insights into prevailing market sentiments. During periods of economic expansion, growth stocks tend to outperform, while value stocks may do better during economic contractions.
International markets: ETFs can provide exposure to global markets and specific countries or regions. By tracking international ETFs, investors can monitor the performance of global markets and identify trends or divergences between different regions. This can be particularly useful for assessing the impact of global events or geopolitical factors on the stock market.
Technical analysis:ETF charts can be analyzed using technical indicators and chart patterns to identify trends, support/resistance levels and potential turning points. Technical analysis techniques, such as moving averages, trend lines or relative strength analysis, can be applied to ETFs to gain insights into the broader market trend.
SPY, QQQ: Tracking Market Trends With ETFs
Markets Monitor provides investors and financial advisors a broad view of performance trends through the lens of major market ETFs. Users of etf.com’s Markets Monitor can see a summary of performance of these ETFs, or they may drill down to specific areas of the market, including equities, sectors, factors, global markets, fixed income, commodities and market movers.
Within each of these tool options, investors and advisors can handpick among preselected ETFs that represent major market indexes.
Markets summary: This is the starting point for the Markets Monitor, with a range of ETFs covering diverse areas of the market, including U.S. stocks, international stocks, fixed income and commodities.
Equities drilldown: Users can drill down to equity markets by plotting performance of U.S.-issued ETF tickers that are modeled on key global equity exchanges in the Americas, Europe, Mid-East/Africa & Asia-Pacific.
Sectors drilldown: This part of the tool enables users to plot performance of U.S.-issued ETF tickers that are modeled on 11 S&P 500 sectors and 19 industries.
Factors drilldown: Users are enabled to plot performance of U.S.-issued factor ETFs, which include factors such as momentum, high dividend yield and volatility.
Global markets drilldown: As the name suggests, users can easily single out performance trends on U.S.-issued ETF tickers that are modeled on the broad equity universes of major countries in the Americas, Europe, Mid-East/Africa & Asia-Pacific.
Fixed income drilldown: This lists U.S.-issued ETF tickers that are modeled after the major classes of fixed income securities including U.S. Treasury, U.S. government agencies, U.S. corporate credit and international credit.
Commodities drilldown: Users can plot performance of U.S.-issued ETF tickers that are modeled after the major classes of commodities including energy, metals and agriculture.
Market movers: This page provides users with insight into what segments of the overall financial markets have moved the most on the current day, using the lens of representative ETFs.
Bottom Line on etf.com's Markets Monitor Tool
The Markets Monitor tool at etf.com is a quick and efficient means of following major market trends through the lens of ETFs that track the major market indexes. It's important to note that while ETFs can provide valuable information about market trends, the Markets Monitor tool does not replace the broader investment decision process, which typically includes further research and analysis.
