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Top ETF Stories Of First Quarter 2016

The start to the first quarter of 2016 was a nightmare, given the twin attacks from oil price slide and China turmoil that intensified fears of a global slowdown. However, these concerns started to fade in the back half of the quarter on continued signs of improvement in the domestic and international markets, pushing global stocks higher. Given this, several events have impacted the ETF world in either a positive or a negative way. Below, we have discussed some of them that dominated headlines and are worth watching in the next quarter: Fed Turned Dovish Again After pulling the trigger for the first rate hike in almost a decade in mid-December, the Fed turned dovish again this year. The cautious approach came on the heels of increased market volatility, global growth concerns, and softness in exports and business investments. In the March meeting, the Fed kept the short-term interest rates steady in the 0.25-0.50% band and dialed back its projection for this year’s hikes. The central bank now expects the federal funds rate to rise to 0.875% by the end of the year, implying two lift-offs, compared with 1.375% that signaled four rate hikes. Expectations of longer-than-expected lower rates have given a boost to the rate-sensitive sectors such as utilities and real estate and high-yield securities. In fact, many of the utility and dividend ETFs like the Vanguard Utilities ETF (NYSEARCA: VPU ) , the Utilities Select Sector SPDR ETF (NYSEARCA: XLU ) , the iShares U.S. Utilities ETF (NYSEARCA: IDU ) , the PowerShares S&P 500 High Dividend Portfolio ETF (NYSEARCA: SPHD ) , the First Trust Morningstar Dividend Leaders Index ETF (NYSEARCA: FDL ) and the ProShares S&P 500 Dividend Aristocrats ETF (NYSEARCA: NOBL ) have been hitting regular 52-week highs and are expected to move higher in the coming weeks (read: Dividend ETFs Hitting All-Time Highs Ahead of Fed Meet ). Though real estate ETFs have not made new highs, they are outperforming the broad market from a year-to-date look. Some of the top ranked funds are the Vanguard REIT Index ETF (NYSEARCA: VNQ ) , the iShares U.S. Real Estate ETF (NYSEARCA: IYR ) and the SPDR Dow Jones REIT ETF (NYSEARCA: RWR ) that are expected to continue their outperformance. Crazy Run of ‘The Oil’ Oil price has been seesawing between losses and gains touching 12-year lows in mid February and then spiraling back to the $40-per-barrel mark in mid March. This spectacular performance led to smooth trading in the overall energy space. In particular, stock-based energy ETFs like the PowerShares S&P SmallCap Energy Portfolio ETF (NASDAQ: PSCE ) , the SPDR S&P Oil & Gas Exploration & Production ETF (NYSEARCA: XOP ) and the First Trust ISE-Revere Natural Gas Index ETF (NYSEARCA: FCG ) surged at least 19% over the past one month. Futures-based energy ETFs like the United States Oil ETF (NYSEARCA: USO ) and the United States Brent Oil ETF (NYSEARCA: BNO ) gained 7% each (read: Crude Back to $40: Can Energy ETFs Sustain Their Rally? ). However, this impressive rally is too good to last as demand will not be enough to reduce the global supply glut. While U.S. producers have started to reduce output and OPEC is looking to freeze production at January levels, increased production from Kuwait, Saudi Arabia and Iran will continue to weigh on the price, thereby failing to rebalance the oil market at least in the short term. Further, PSCE and XOP have an unfavorable Zacks ETF Rank of 5 or ‘Strong Sell’ rating and 4 or ‘Sell’ rating, respectively, while FCG has a Zacks ETF Rank of 3. Japan Moves to Negative Rates In late January, Bank of Japan (BoJ) adopted measures similar to the European Central Bank (ECB) by pushing interest rates to the negative territory, minus 0.1%, for the first time. The aim is to revive growth in the world’s third-largest economy. The move sparked a rally in the Japanese ETFs while weakened the yen against the greenback. Some of the top ranked ETFs in this space are the WisdomTree Japan Hedged Equity ETF (NYSEARCA: DXJ ) , the Deutsche X-trackers MSCI Japan Hedged Equity ETF (NYSEARCA: DBJP ) , the WisdomTree Japan Hedged SmallCap Equity ETF (NASDAQ: DXJS ) and the iShares Currency Hedged MSCI Japan ETF (NYSEARCA: HEWJ ) . Negative interest rates in Japan had also accelerated the selling wave in the global banking sector in early February, which was already bearing the brunt of the tumultuous ride in the market. Nevertheless, the banking sector has been emerging from the crisis in recent weeks on a rebound in oil prices and improving global sentiments. Gold and Gold Miners Rocking After posting the third annual loss in 2015, gold has been on a tear this year as increased market volatility has perked up demand for the yellow metal as a store of value and a hedge against market turmoil. Additionally, the expectation for longer-than-expected low rates will continue to raise the appeal for the gold bullion. Notably, the SPDR Gold Trust ETF (NYSEARCA: GLD ) , the iShares Gold Trust ETF (NYSEARCA: IAU ) , the ETFS Physical Swiss Gold Trust ETF (NYSEARCA: SGOL ) and the Van Eck Merk Gold ETF (NYSEARCA: OUNZ ) are up about 17% each, from a year-to-date look. These funds have a Zacks ETF Rank of 3. Acting as a leveraged play on underlying metal prices, metal miners tend to experience more gains than their bullion cousins in a rising metal market. In particular, the iShares MSCI Global Gold Miners ETF (NYSEARCA: RING ) stole the show in terms of performance, surging 59.3%. This was followed by gains of 52.8% for the ALPS Sprott Junior Gold Miners ETF (NYSEARCA: SGDJ ) , 50.5% for the PowerShares Global Gold and Precious Metals Portfolio ETF (NASDAQ: PSAU ) and 50.3% for the Sprott Gold Miners ETF (NYSEARCA: SGDM ). Bottom Line Investors should closely watch the developments in these spaces as we head into the next quarter and should tap opportunities as and when they come. Link to the original post on Zacks.com

5 Low-Cost ETFs Poised For Long-Term Wins

The global ETF industry has been growing by leaps and bounds and has already accumulated almost $4.5 trillion in assets, as per ETFGI data. ETFs gained popularity over mutual funds because of their flexibility, liquidity and low cost among other factors. In fact, low cost has been one of the biggest drivers for the ETFs, enhancing their total returns. This is primarily because fund managers generally don’t actively manage an ETF. As these products often engage in passive index-based investing, they charge a much smaller fee. Several research reports have shown that only a handful of fund managers outperform the market over the long term. This gives a major boost to passive investing strategies. As per the 2015 SPIVA U.S. Scorecard , over the last five years, 84.2% of large-cap managers, 76.7% of mid-cap managers, and 90.1% of small-cap managers underperformed the S&P 500, the S&P MidCap 400 and the S&P SmallCap 600, respectively. The number of managers outperforming the benchmark index is equally bleak over the 10-year investment horizon. Roughly 82.14% of large-cap managers, 87.61% of mid-cap managers, and 88.42% of small-cap managers lagged their respective benchmarks. Additionally, managers across all international equity categories failed to outperform their benchmarks in the above mentioned time frame. Although there are several cost components to an ETF like trading commissions and bid/ask spreads, expense ratios are paid the foremost attention by investors. With several ETF providers including iShares, Vanguard and Charles Schwab vying with each other, ETFs have gotten cheaper every year (read: 5 Costly ETF Mistakes You Can Easily Avoid ). Knowing how important the expense ratio is, we have highlighted five of the cheapest ETFs for long-term investors (see: all the ETFs with Low Expense Ratios here ): iShares Core S&P Total U.S. Stock Market ETF (NYSEARCA: ITOT ) – Expense ratio: 0.03% This fund provides a broad exposure to the U.S. equity market by tracking the S&P Total Market Index and is one of the low-cost choices in the equity ETF world, charging just 3 bps in annual fees. Holding 3,819 securities, the fund is widely diversified across sectors and securities. Information technology is the top sector accounting for less than 20% while Apple (NASDAQ: AAPL ) is the top firm taking 2.7% share of the basket. Large caps account for 74% of the assets while mid and small caps take the remainder. ITOT is a popular and liquid ETF with AUM of $3.6 billion and average daily volume of 286,000 shares. The product has delivered 70.9% returns over the last five-year period. Schwab U.S. Broad Market ETF (NYSEARCA: SCHB ) – Expense ratio: 0.03% This fund also provides a broad exposure to the U.S. equity market. The fund tracks the Dow Jones U.S. Broad Stock Market Index and charges just 3 bps in annual fees. Holding 2,077 securities, the fund is widely diversified across sectors and securities. Like ITOT, information technology is the top sector accounting for less than 20% while Apple is the top firm taking 3.3% share of the basket. Large caps account for 73% of the assets while mid and small caps take the remainder. SCHB is one of the popular and liquid ETFs with AUM of $5.8 billion and average daily volume of 927,000 shares. The product has delivered 70.7% returns over the last five-year period. Schwab U.S. Large-Cap ETF (NYSEARCA: SCHX ) – Expense ratio: 0.03% This fund targets the large-cap segment of the U.S. equity market by tracking the Dow Jones U.S. Large-Cap Total Stock Market Index and holds 777 securities in its basket. Here again, information technology is the top sector with just over 20% share while Apple is the top firm at 3%. With an expense ratio of 0.03%, the fund has amassed $5.3 billion in its asset base and volume is solid at over 783,000 shares. While this is a large-cap fund, mid and small caps take minor portions each in the basket. The fund has gained about 72.4% over the past five-year period. Vanguard Total Stock Market ETF (NYSEARCA: VTI ) – Expense ratio: 0.05% This ETF follows the CRSP US Total Market Index, holding a large basket of 3,712 securities. Each security holds no more than 2.5% of total assets while financials, technology, consumer services and health care make up for a nice sector mix in the portfolio. It is one of the largest and a popular fund with AUM of nearly $57.9 billion and average daily volume of nearly 3.5 million shares. It charges 5 bps in fees and expenses and has gained 70.3% over the past five years. Vanguard S&P 500 ETF (NYSEARCA: VOO ) – Expense ratio: 0.05% This is another low-cost, well-diversified large-cap fund tracking the S&P 500 index. It holds 505 securities in its basket with each taking less than 3.2% share while sector-wise too, none accounts for more than 21% of assets. The fund has AUM of $43.5 billion and trades in heavy volume of 2.7 million shares per day on average. Expense ratio came in at 0.05%. The ETF returned about 74.5% in the same period. Link to the original post on Zacks.com