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Fed-Free Week Still Full Of Obstacles For ETFs

Summary A 2015 rate hike is off the table. In the near term, USDU might be the preferred option of the pair simply because it is short several emerging markets currencies, which have the potential to continue falling. As is often the case with weekly ETF previews, some familiar ETFs frequently re-emerge, and that is the case this week. By Todd Shriber, ETF Professor After a week spent worshiping at the altar of the Federal Reserve, financial markets will be spared the specter of a Fed meeting in the week ahead. However, that does not mean a 2015 rate hike is off the table. San Francisco Fed President John Williams told reporters last week that a rate hike this year could be appropriate. Richmond Federal Reserve President Jeffrey Lacker on Saturday said he dissented at a Fed policy meeting because he thought the economy was now strong enough to warrant higher interest rates, Reuters reported . Federal Reserve Bank of St. Louis President James Bullard said he argued against the continuation of the Fed’s zero interest rate policy. The ETF Situation The PowerShares DB USD Bull ETF (NYSEARCA: UUP ) and the actively managed WisdomTree Bloomberg U.S. Dollar Bullish ETF (NYSEARCA: USDU ) are the two primary exchange traded funds tracking greenback fluctuations, so suffice to say these ETFs would like 2015 rate hike momentum to reemerge and do so soon. In the near term, USDU might be the preferred option of the pair simply because it is short several emerging markets currencies, which have the potential to continue falling. UUP tracks the dollar against major developed market currencies, some of which could and should rally the longer the Fed puts off higher interest rates. There is some evidence to suggest some market participants were not reassured by the Fed’s no-hike call last week. For example, the Consumer Staples Select Sector SPDR ETF (NYSEARCA: XLP ) and the Utilities Select Sector SPDR ETF (NYSEARCA: XLU ) , each among the most rate-sensitive sector ETFs, lost a combined $382.3 million in assets last week. XLP posted a modest gain, while XLU climbed 1.6 percent – which could mean the latter is worth monitoring in the week ahead. Watch List As is often the case with weekly ETF previews, some familiar ETFs frequently re-emerge, and that is the case this week. It should be noted the Global X FTSE Greece 20 ETF (NYSEARCA: GREK ) merits a place on traders’ watch lists in the week ahead. In what feels like a monthly occurrence, Greece holds national elections again this weekend. Even with potential for increased volatility due to the election and news of a major index provider lowering Greece’s market classification , the Global X FTSE Greece 20 ETF climbed 3.8 percent last week and is up 6.3 percent over the past month. It could be a sign of a renewed risk appetite, though only time will tell, but the PowerShares QQQ Trust ETF (NASDAQ: QQQ ) , the NASDAQ-100 tracking ETF, hauled in over $1.2 billion in new assets last week despite suffering a modest drop. Remember what investors are doing by being long QQQ. They are making an ETF proxy bet on the likes of Apple, Microsoft and Amazon, as those stocks combine for over a quarter of QQQ’s weight. Disclaimer: Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Conservative Sector ETF Ideas For September

Over the last 20 Septembers, the S&P has posted an average performance of zero. If history repeats in September 2015, investors will want to take a conservative approach to sector exchange traded funds this month. The Utilities Select Sector SPDR ETF is usually the top performer among the nine sector SPDRs in the month of September. By Todd Shriber, ETF Professor September is here and that is great news for fans of American football, but financial market data indicate equity bulls would do well to curb what enthusiasm they have left after a trying August. For believers in seasonal trends, it must be noted that over the last 20 Septembers, the S&P has posted an average performance of zero. The benchmark U.S. equity index is traditionally flat in September over that period, according to Equity Clock data. That does not mean sector-level opportunities cease to exist in the ninth month. Rather, the opposite is true, but if history repeats in September 2015, investors will want to take a conservative approach to sector exchange traded funds this month. Utilities The Utilities Select Sector SPDR (NYSEARCA: XLU ) is usually the top performer among the nine sector SPDRs in the month of September, averaging a modest gain in the ninth month of the year, according to CXO Advisory . XLU is in the midst of what is supposed to be a seasonally strong period for the largest utilities ETF as the fund is usually the second-best of the nine SPDRs in August. Indeed, XLU lived up to that track record, but underscoring just how poorly stocks performed last month, XLU lost 4 percent. Only the Energy Select Sector SPDR ETF (NYSEARCA: XLE ) was better among the nine SPDRs. Consumer Staples According to CXO data, the Consumer Staples Select Sector SPDR ETF (NYSEARCA: XLP ) is usually the second-best of the nine SPDRs this month, though like the S&P 500, is usually about flat this month, reminding investors that sometimes less bad is good. However, before backing up the bus on XLP, investors should note that the largest staples ETF was usually the best of the sector SPDRs in August, but that historical data did not mean much as XLP tumbled 6.1 percent last month. Materials & Tech In terms of the worst of the nine SPDRs in September, that dubious honor goes to the Materials Select Sector SPDR ETF (NYSEARCA: XLB ) followed by the Technology Select Sector SPDR ETF (NYSEARCA: XLK ). This is where things get interesting and those things are a reminder that seasonal trading often requires the user to be nimble. Historical data, courtesy of CXO, indicate XLU is usually the best SPDR this month, but that is before it turns into October’s worst. Conversely, XLK is historically the second-worst SPDR in September before it becomes the best of the nine in October. Disclaimer: Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Buying The Dip With Japan ETFs

Ex-U.S. developed markets, including Japan, have provided no shelter from the recent storm that was ravaged global equity markets. Before leaving Japanese stocks and the aforementioned ETFs for dead, investors might want to consider the view that Asia’s second-largest economy could lead a rebound in developed markets stocks. Recently slowing momentum for currency hedged ETFs does not mean investors should abandon the asset class altogether. By Todd Shriber, ETF Professor Ex-U.S. developed markets, including Japan, have provided no shelter from the recent storm that was ravaged global equity markets. With the CurrencyShares Japanese Yen Trust (NYSEARCA: FXY ) up 2.8 percent over the past month on the back of safe-haven buying of the Japanese currency, the U.S. Dollar Index is off 1.5 percent, a decline that has plagued popular currency hedged ETFs. Over the same period, the WisdomTree Japan Hedged Equity Fund (NYSEARCA: DXJ ) and the Deutsche X-trackers MSCI Japan Hedged Equity ETF (NYSEARCA: DBJP ) are off an average of 8.3 percent, a decline that is 260 basis points worse than that of the MSCI EAFE Index. Before leaving Japanese stocks and the aforementioned ETFs for dead, investors might want to consider the view that Asia’s second-largest economy could lead a rebound in developed markets stocks. Looking Into Japan On the surface, many investors might criticize the lack of inflation, weak macro data and Japan’s corporate exposure to EM as good reasons why Japan’s equity market should have played catch up. However, investors are ignoring a really significant divorce between Japanese earnings revisions and a number of macro indicators. “This ought to mean that Japanese equities ‘bounce’ further than its peer group as sentiment rebounds,” according to a Jefferies note out Wednesday. Jefferies has Buy ratings on 13 big-name Japanese stocks, including familiar names such as Bridgestone ( OTCPK:BRDCY ) , Nintendo ( OTCPK:NTDOY ) and Yamaha Motor ( OTCPK:YAMHF ) . Two of those 13 stocks are top 10 holdings in DXJ, an ETF that is among the top 10 asset-gathering funds this year. Of those 13 stocks, four are among the $1.2 billion DBJP’s top 10 holdings. Recently slowing momentum for currency hedged ETFs does not mean investors should abandon the asset class altogether. In fact, some market observers see opportunity with some of these funds, even as some professional investors get skittish about the dollar rally . Best Positioned? Jefferies sees Japan as better positioned than two of its primary Asian export rivals, South Korea and Taiwan. Markets seem to agree as DBJP and DXJ are each positive year-to-date, while the comparable South Korea and Taiwan ETFs are sporting losses in excess of 15 percent . “The bottom line is that Japanese earnings have surprised in their strength relative to macro indicators. The fact that companies have been able to maintain pricing power and keep inventories-to-shipments in-line has meant that they have not entered a pricing battle. Equally, it seems that there is some evidence that capacity tightness is leading to some fresh capital investment helped by steady profit growth,” adds Jefferies. An alternative way to play a rebound in Japanese stocks is with the newly-minted Deutsche X-trackers Japan JPX-Nikkei 400 Hedged Equity ETF (NYSEARCA: JPNH ) , which debuted last week, follows the JPX-Nikkei 400 Index, a benchmark that gives investors a fundamental approach to Japanese stocks. “The JPX-Nikkei 400 Index employs a rigorous screening process based on return on equity, cumulative operating profit and market capitalization to select high-quality, capital-efficient Japanese companies,” according to a statement issued by Deutsche AWM. Four of JPNH’s top 20 holdings are among the 13 Japanese stocks earning buy ratings from Jefferies. Disclaimer: Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.