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6 ETFs To Watch In September

After a worldwide brutal stretch in August, the investing cohort must be keenly following the market movement in September. In any case, September is a seasonally cursed month having underperformed historically especially when it comes to stocks. According to the Stock Trader’s Almanac , September ended in red 55% of the time while S&P Dow Jones Indices indicated an average fall of 1.03% return over the last 87 years in September. Prelude to September There is no end to hurdles in the global market, with China being the main culprit. The world’s second-largest economy completely derailed the market in August by devaluing its currency yen by 2%, to presumably maintain export competitiveness and by revealing six-and-a-half-year low manufacturing data for August. Even repeated attempts and intervention by the Chinese policy makers in its economy and stock markets did not help and the bloodbath in global risky assets continued. The U.S. and Asian stocks had experienced a three -year low monthly performance in August. Europe saw the most horrible month since the 2011 debt debacle. Commodities crumbled to multi-year lows on demand issues and hit hard all commodity-rich nations. All three key U.S. indices met with correction in the month, though these managed to score gains in the end. In short, August got on investors’ nerves. Weak Start to September Some might have hoped for relief and rebound in this dull scenario, defying the seasonal weakness of September. But much to their shock, September unfolded on a grave note, with U.S. stocks in red on global growth issues. The contagion rooted in China’s factory sector slowdown, the end to stock purchases by Chinese government-backed funds and lack of certainty in the upcoming Fed policy ravaged the global market all over again. Most importantly, oil prices that recently impressed investors with the largest three-day oil price gain in 25 years , resumed their decline on China-led growth fears. Among the top U.S. ETFs, investors saw SPY lose about 3%; DIA shed about 2.9% while QQQ moved lower by about 3.1% on the first day of September. This makes it more important to pinpoint the ETFs that could hop or drop in September as volatility in various markets could make for some interesting near-term outlook. Vanguard Extended Duration Treasury ETF (NYSEARCA: EDV ) As September is the most speculated month in recent times for the rate lift-off, all eyes will be on the Fed meeting scheduled mid-month. A yes or no from the Fed would drag down or drive higher this long-term U.S. Treasury bond ETF. Not only this ETF, several other bond ETFs would be impacted by the Fed move. Market Vectors ChinaAMC SME-ChiNext ETF (NYSEARCA: CNXT ) China, the epicenter of the latest global chaos, should be a high-alert territory throughout September. If no further rotting news emanates from the nation, the stocks and funds might snap back on bargain hunt as they say no news is good news. But if anything wrong happens on the economic front, the ETF could be due for a wilder ride, though the chance of the latter appears less. Vanguard Total Stock Market ETF (NYSEARCA: VTI ) This all-cap U.S. equity ETF could be in watch in September. The fund was off over 2.9% to start the month and could be used as a representative of the total stock market performance in the ill-fated month. Any new China-driven sell-off or stronger Fed rate hike bet could thwart the fund and vice versa. S&P Small-Cap Consumer Staples Portfolio (NASDAQ: PSCC ) Since the consumer staples sector is known to act in investors’ defense in a rough market, this fund might come to one’s rescue in the troubled month. A small-cap exposure will help the fund mitigate the currency-translation woes, and at the same time enable it to capture the improving U.S. consumer sentiment. PSCC was down 4.4% in the last one month and up over 1.7% in the last five days (as of September 1). This was one of the best performances in the consumer staples’ segment. In fact, the consumer staples sector outdid another safe sector utility in recent times. SPDR S&P Metals & Mining ETF (NYSEARCA: XME ) The metal and mining industry has been a dreadful area as commodities were smashed on China-related worries (one of the major consumers of metals in the world) and the strength in the greenback. However, the product gained about 9% in the last five trading sessions (as of September 1, 2015) as price of some precious metals like gold brightened on their safe-haven status and the greenback lost some its strength on Fed ambiguity. So, let’s see whether further pain or gain is in store for this stressed but cheap space. United States Oil Fund (NYSEARCA: USO ) Who can forget oil? It hit September on a bearish note and will keep investors busy in assessing how it will finish the month especially given the flow of news (both good and bad) from the space. USO was down 6.8% on the first day of September and shed just 1.9% in the last one month (as of September 1, 2015). Original Post

Is A Recession Necessary For The S&P 500 To Fall 20% From All-Time Highs?

Is it possible for a bear market to occur when the U.S. economy is expanding? Certainly. In spite of the obvious evidence that U.S. stock assets tend to fall long before the most prominent minds affirm contraction in the U.S. economy, an overwhelming number of analysts keep exclaiming that there is no recession in sight. Right now, U.S. stocks require clarity on rate policy more than they require anything else. Is it possible for a bear market to occur when the U.S. economy is expanding? Certainly. In fact, most bear markets are already well on their way to becoming 20% price declines long before a recession is formerly identified. Consider the most recent bearish retreat (10/07-3/09). The National Bureau of Economic Research (NBER) officially declared on 12/1/08 that the U.S. recession had started in December of 2007 – a declaration that came nearly one year after the economic downturn’s inception. Nine months before the NBER expressed its “recession” call, the S&P 500 had already plummeted close to the 20% level (March 2008.) At that moment, the Federal Reserve saved financial markets by joining JPMorgan Chase in bailing out Bear Stearns. Then, in the first week of July, five months before the NBER proclamation, the S&P 500 had descended more than the requisite 20%. And by the time anyone could count on an authenticated recession, the S&P 500 had already plummeted roughly 47.8% – close to half of its entire value. Well, okay. I suppose that the world’s best economists should err on the side of caution before making hasty decisions. Perhaps NBER, composed of academic economists from Harvard, Stanford and other top-notch universities, were quicker in warning investors prior to the 3/2000-10/2002 tech wreck? Unfortunately, nine months before the NBER expressed a March 2001 recession start in November of 2001, the S&P 500 had already made its bearish descent. (Nine months again?) It gets worse. The S&P 500 had already dropped 29% by November of 2001 and the “New Economy” NASDAQ had already plummeted 65%! In spite of the obvious evidence that U.S. stock assets tend to fall long before the most prominent minds affirm contraction in the U.S. economy, an overwhelming number of analysts keep exclaiming that there is no recession in sight. And without a recession, they say, there’s not going to be a bear. I am not sure this is an accurate statement. Since 1950, we have seen non-recession 20%-plus drops in 1962, 1966, 1978 and 1987. We have also seen non-recession drops that do not get the full benefit of the bear title (e.g., 1998’s Asian currency crisis/Long-Term Capital Management, 2011’s eurozone, etc.), yet reached the 20% threshold via “intra-day” price movement and/or “rounding.” What’s more, why do people automatically assign the recession tag to bear markets like the 3/2000-10/2002 tech wreck when the recession first began one year later in March of 2001? Perhaps because NBER later revised the recession date as having started in Q4 2000? I have no idea if we will see a bear on this correction go-around or the next 10%-19% pullback or the one after that. What I do know is that the commodity slump has resulted in ConocoPhillips (NYSE: COP ) slashing 10% of its global workforce; high paying oil jobs continue to disappear in a world of $45 oil. I also know that the Federal Reserve wants to hike overnight rates, likely raising the borrowing costs for consumers and businesses just as the Atlanta Fed expects Q3 GDP at an anemic 1.2%. Perhaps most importantly, I recognize that the U.S. economy is part of a global economy that has been decelerating. JPMorgan’s Global Manufacturing PMI is now at 50.7 where a reading below 50 would be indicative of a global manufacturing recession. In mid-August’s ” 15 Warning Signs ,” I discussed the reasons why a pullback from the market top was exceptionally likely. One week later, in ” Don’t Blame China, ” I talked about the reasons why investors should expect a relief rally. And in my Thursday (8/27) commentary, ” Are You Selling The Drama Or Buying The Rally ,” I wrote: If history teaches us that benchmarks tend to retrace half of their losses before retesting their lows – if you feel like you’ve been here before and you don’t choose to be scarred like that again – perhaps you might anticipate better buying opportunities in the weeks ahead. You should not be surprised by today’s (Tuesday, September 1) extremely volatile move lower. The S&P 500 has moved back below the correction point of 1917 because the global economy is decelerating and investors are fearful that a rate hiking campaign by the Federal Reserve might be the straw that breaks the U.S. camel’s spine. And manufacturer-dependent sector funds like Materials Select Sector SPDR (NYSEARCA: XLB ) are taking the heaviest hits. Do I think that a Fed tightening cycle might cause an imminent U.S. recession? Not if chairwoman Yellen and other committee members decide upon a sloth-like pace of one-eighth of a point every third meeting or a “one-n-done” quarter point that would not be revisited for six months. Then again, I am not sure that the recession/non-recession matters as much as others do. Right now, U.S. stocks require clarity on rate policy more than they require anything else. The longer it takes for the Fed to provide clarity, the more U.S. stocks are likely to struggle. Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships.

These Country ETFs Benefit From Oil Rebound

It’s truly been a roller-coaster ride for oil. The liquid commodity plunged to a six-and-a-half year low at the start of the week only to record the highest single-day gain in over six years to end the week. While pockets of weakness in most global superpowers including the Euro zone, China and Japan have resulted in weaker activities and weighed on crude oil prices so far, the recent rout in the Chinese market following its currency devaluation and grave economic situation slaughtered the already weak oil prices (read: 4 Ways to Short the Energy Sector with ETFs ). However, after a week-long losing streak, jittery investors worldwide saw some relief on Wednesday as China slashed rates to boost its economy and repeatedly intervened into the stock market to contain the relentless slide. Also, hunt for bargain took center stage. To add to this, the U.S. economy grew at 3.7% in Q2, which breezed past the initial reading of 2.3% growth and 0.6% expansion recorded in the seasonally weak Q1. A strong rebound in the U.S. economy, which is in fact the world’s largest economy, ruled out the demand-related fear out of the oil space. Plus, as per the American Petroleum Institute (API) crude stock piles declined by 7.3 million barrels in the week ending August 21,whcih is way lower than analysts’ projection of a rise of 1.9 million barrels in crude inventories. This overall bullish sentiment showered massive gains on oil prices on August 27 as oil advanced around 10%. Both WTI and Brent crude benefited from this unexpected surge. As a result, key oil producing and exporting countries that were on a downtrend so long, saw a sharp rise on Thursday trading. As we all know, ETFs offer a great opportunity while it comes to playing a particular nation. In light of this, we have highlighted a few country ETFs that could see a turnaround in the days ahead should oil price continue to rise ( see all energy ETFs here). Market Vectors Russia ETF (NYSEARCA: RSX ) Things have been pretty tough for Russia for last one-and-a-half year. If the tussle between Russia and the West on the Ukraine issue bothered the country, oil – seemingly the main commodity of the nation – posed further risks to its economy (read: 3 Russia ETFs at Bargain Prices Right Now ). RSX is the most popular and liquid option in the space with an asset base of $1.6 billion and average trading volume of more than 11 million shares a day. The fund tracks the Market Vectors Russia Index to provide exposure to the Russian equities. The energy sector accounts for about 43% of RSX with Gazprom and Lukoil – the Russian energy giants – taking more than 15% share of the fund. RSX charges 63 basis points as expenses. The fund was up 6.7% on August 27. iShares MSCI Malaysia Index Fund (NYSEARCA: EWM ) The Malaysian equity market has been also been a weak spot lately as its neighboring country China devalued its currency in mid August. Also, falling oil price hurt the stocks of the oil-rich Malaysia, which happens to be one of the largest Asian crude exporters. Political crisis is another cause of concern for Malaysia (read: 3 Country ETFs Impacted By China Currency Devaluation ). The $256 million-fund EWM looks to track the performance of the Malaysian equity market. EWM charges investors 48 basis points a year in fees and was up 5.2% on August 27 both on oil price recovery and the return of risk-on trade sentiment into the market. iShares MSCI UAE Capped ETF (NASDAQ: UAE ) Oil-rich OPEC nations (Organization of Petroleum Exporting Countries) must be the big beneficiary of this sudden surge in oil. UAE is such a country. The fund provides exposure to 32 stocks by tracking the MSCI All UAE Capped Index. The ETF has accumulated $27.5 million in AUM so far while charging investors 62 bps in annual fees. Volume is paltry trading in about 15,000 shares a day on average. The fund returned 5.5% on August 27. Another OPEC nation Qatar also got mileage out of this jump. Its pure play ETF, MSCI Qatar Capped ETF (NASDAQ: QAT ) soared 8.1% yesterday while yet another Middle East fund Market Vectors Gulf States Index ETF (NYSEARCA: MES ) added over 4.7%. iShares MSCI Canada ETF (NYSEARCA: EWC ) Canada is also among the world’s top 10 oil producers. The best way to invest in Canada is through iShares MSCI Canada ETF, a product that has nearly $1.88 billion in assets. The fund tracks the MSCI Canada Index, holding just under 100 stocks in its basket. Although financials takes the top spot at about 40%, energy makes up a huge chunk of assets accounting for about 20% of the total. The fund gained over 3.6% on August 27, 2015. EWC charges 48 bps in fees. Original Post