Any long-term index investors that have been able to manage positive returns during the month of August have been extremely lucky. The SPDR S&P 500 ETF (NYSE:SPY) tanked to the tune of 7% over the course of the month. Safe-haven plays were among the most successful pockets of the market while almost everything else was being taken to the woodshed.
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The United States may have seen its debt receive a slight downgrade from Standard & Poor's, but that has not stopped investors from piling their money into Treasuries. This trend has benefited ETFs such as the iShares Barclays 20+ Year Treasury Bond Fund (NYSE:TLT) which has risen 9.5% during the month of August.
The uncertainty that the equity markets have unleashed on investors has been reason enough for some to flee into Treasuries. Although August has been one of the hottest months for TLT since the financial crisis in late 2008, I do not know how much longer this current run is sustainable. I would not be surprised to see TLT pullback sharply once investors come out of hiding just as it did in early 2009.
The PowerShares DB Agriculture Fund (NYSE:DBA) has not experienced the run-up in price that TLT has, but with a return of 6% on the month it has been better than most. A blazing hot summer has darkened the outlook for crop yields this year. As a result, corn prices have surged 24% since the beginning of July.
Precious Metals Pull Through
As would be expected under the circumstances, a flight to safety has driven up the price of the SPDR Gold Trust (NYSE:GLD) by 10% during the month of the August. Earlier in the month, gold hit a record high of more than $1,900 an ounce.
The near term picture for gold may be volatile. The precious metal took a break this past week as it experienced 3% pullback. The parabolic run that gold has seen in recent months may be leveling off, but with so much uncertainty surrounding global economic growth, the metal does not seem poised to drop off of a cliff right now.
The iShares Silver Trust (NYSE:SLV) was one of the best performing ETFs in 2010. It has strung together a relatively impressive month of August given the duress the rest of the market has been under. SLV is up 2.5% so far this month. Tight silver supplies could push this ETF higher as the remainder of 2011 unfolds.
The Bottom Line
The overwhelming majority of long ETFs have been in the red this month. Amidst the carnage, ETFs tracking Treasuries, agricultural commodities and precious metals have survived August with positive gains. A flight to safety has been the name of the game recently, but the resolve of these ETFs will certainly be tested if and when investors increase their appetite for risk taking in the months ahead. (For additional reading, take a look at Take On Risk With A Margin Of Safety.)
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