If you just owned two ETFs — the SPDR S&P 500 (SPY) and the iShares Russell 2000 (IWM) — you'd be sitting at all-time highs, and all this talk about rotating out of consumer staples, real estate and emerging markets and into banks, industrials and materials would be of no real consequence to you.
If you owned those two ETFs, you'd be owning practically the entire market.
"The action in the last month really demonstrates the futility of owning sectors," said Alec Young, an independent strategist formerly with S&P and Oppenheimer. "We talk about all this rotation, but how many investors have really been able to call this turn? Even the professional investors have had a hard time. For most investors the best play is to own the broad market."
Fortunately, that's what a lot of people decided to do. There have been significant inflows into S&P 500 and small-cap (Russell 2000) ETFs, but there have also been significant inflows into financials (XLF), industrials (XLI), and significant outflows from emerging markets (EEM), gold (GLD) and consumer staples (FXG). This week, we also saw outflows from select technology ETFs like semiconductors (SMH).
So you would have made a lot of money if you would have rotated out of a bunch of sectors and into another bunch of sectors.
But almost no one did that. You could have stood pat and stayed long.
That, Young says, is a vindication for all the traders and funds who have argued against furiously trading in and out of positions.
Said Young: "It's a great marketing opportunity for Vanguard."