Tag Archives: consumer

4 Consumer ETFs To Ride On Holiday Optimism

Despite a weak start, the holiday season gained a firmer footing. This is especially true given the modest retail sales data for November and an improved consumer sentiment data for December. After months of sluggish spending, retail sales rose a modest 0.2% in November, representing the largest increase since July. Meanwhile, consumer confidence improved for the third consecutive month in December, with the preliminary University of Michigan sentiment index reading 91.8, up from 91.3 in November (read: 5 ETFs for Loads of Holiday Shopping Delight ). Solid job additions, slowly rising wages and cheap fuel are providing consumers extra money to spend on a wide range of products including electronics and appliances, clothing, sporting goods and books, and at restaurants and bars. In particular, spending increased 0.8% on clothing, 0.6% on electronics and appliances, and 0.8% at sporting goods and hobby stores. The strong trend is likely to continue for the rest of the holiday shopping season given an improving U.S. economy, a recovering housing market and stepped-up service activities. The National Retail Federation (NYSE: NRF ) expects total holiday sales in November and December (excluding autos, gas and restaurant) to grow at a solid pace of 3.7%. Though this marks a deceleration from last year’s growth rate of 4.1%, it is well above the 10-year average of 2.5%. Investors should note that online sales have superseded brick-and-mortar retail sales this year with mobile shopping playing a crucial role. Online sales are projected to grow 6-8% to $105 billion. ComScore expects online sales to jump 14% year over year to $70.06 billion for the full holiday season (November and December), outpacing the growth of brick-and-mortar retail sales. Given the holiday cheer, investors should cycle into the consumer discretionary space in order to obtain a nice momentum play. While looking at individual companies is certainly an option, a focus on the top-ranked consumer discretionary ETFs could be a less risky way to tap into the same broad trends (see: all the Consumer Discretionary ETFs here ). Top Ranked Consumer Discretionary ETF in Focus We have found a number of ETFs that have the top Zacks ETF Rank of 1 or ‘Strong Buy’ rating in this space and are thus expected to outperform in the months to come. While all the top-ranked ETFs are likely to outperform, the following four funds could be good choices. These funds have enjoyed a strong momentum and have potentially superior weighting methodologies that could allow them to continue leading the consumer space in the coming months. PowerShares DWA Consumer Cyclicals Momentum Portfolio ETF (NYSEARCA: PEZ ) This product tracks the DWA Consumer Cyclicals Technical Leaders Index. It holds 38 stocks having positive relative strength (momentum) characteristics, with none holding more than 5.4% of assets. This approach results in a large cap tilt at 43%, followed by 31% in mid caps and the rest in small. About 30% of the portfolio is dominated by specialty retail while hotel restaurants and leisure, textiles apparel and luxury goods, and airlines round off the next three positions with double-digit exposure each. The fund has managed $277.8 million in its asset base while trades in a lower average daily volume of 58,000 shares. It charges 60 bps in annual fees and added about 0.7% over the past one month. First Trust Consumer Discretionary AlphaDEX ETF (NYSEARCA: FXD ) This follows an AlphaDEX methodology and ranks stocks in the consumer space by various growth and value factors, eliminating the bottom ranked 25% of the stocks. This approach results in a basket of 129 stocks that are well spread out across each security, with none holding more than 1.7% of assets. About 49% of the portfolio is focused on mid cap securities with specialty retail being the top sector accounting for nearly one-fourth of the portfolio, closely followed by media (15.8%). FXD is one of the popular and liquid ETFs in the consumer discretionary space with AUM of $2.4 billion and average daily volume of 456,000 shares per day. It charges a higher 63 bps in annual fees and gained 0.9% over the past one month. Market Vectors Retail ETF (NYSEARCA: RTH ) This fund provides exposure to the retail segment of the broad consumer space by tracking the Market Vectors US Listed Retail 25 Index. It holds about 26 stocks in its basket with AUM of $147.6 million, while average daily volume is light at around 62,000 shares. Expense ratio came in at 0.35%. It is a large-cap centric fund that is heavily concentrated on the top firm Amazon.com (NASDAQ: AMZN ) with 15.3% share, closely followed by Home Depot (NYSE: HD ) at 8.9%. Sector wise, specialty retail occupies the top position with 29% share, followed by a double-digit allocation each to Internet & catalogue retail, hypermarkets, drug stores, and health care services. The product has added 5.3% over the past month. SPDR S&P Retail ETF (NYSEARCA: XRT ) This product tracks the S&P Retail Select Industry Index, holding 104 securities in its basket. It is widely spread across each component as none of these holds more than 1.47% of total assets. Small-cap stocks dominate about two-thirds of the portfolio while the rest have been split between the other two market cap levels. In terms of sector holdings, apparel retail takes the top spot with 22.3% share while specialty stores, automotive retail, and Internet retail also have a double-digit allocation each. XRT is the most popular and actively traded ETF in the retail space with AUM of about $948.4 million and average daily volume of more than 4.1 million shares. It charges 35 bps in annual fees and gained 2.5% in the past one month. Link to the original post on Zacks.com

Market Strategies For 2015 And 2016

Market Strategies For 2015 And 2016 | Seeking Alpha Seeking Alpha ‘ + ”; $(‘header’).insert({ before: element }); _bindEvents(); Effect.BlindDown(‘ipad_beta_promo_container’, { duration: 0.5 }); } } function _bindEvents() { var closeBtn = document.querySelector(‘#ipad_beta_promo_container #close_promo_ipad’); if (closeBtn) { closeBtn.addEventListener(‘click’, function () { createCookie(‘hide_ipad_promo’, 1, 1); Effect.BlindUp(‘ipad_beta_promo_container’, {duration: 0.5}); Effect.BlindUp(‘keep_fixed’, {duration: 0.5}); Effect.BlindUp(‘close_promo_ipad’, {duration: 0.5}); }); } } add_ipad_promo_if_needed(); })(); 1. Market outlook for rest of the year; expectations for 2016; what were the main surprises in 2015? Expect a dive on 16th December, when the Fed announces its rate hike. The Bank of New York Mellon (NYSE: BK ) reckons that during Fed tightening cycles since 1946, every time the Fed has raised rates, the market has gained three per cent over the following 12 months after this “lift-off”. ( Financial Times , 10th December, 2015, p. 21). Then expect a year-end rally on account of portfolio managers wanting to improve their annual performance. Surprises: The market crash of September AND the way that the Chinese government tried to halt it with its interventionist policies. 2. Investment strategy; where to find opportunities; how to separate winners from losers How to separate winners from losers: use our Economic Clock®! Winners where there is an excess supply of money, or outlook of an excess supply of money. Losers: where there is an excess demand for money, or outlook of an excess demand for money. INVESTMENT STRATEGY The winners are Europe, Japan, the US and China: the first two have an excess supply of money; the US has a tiny excess supply of money and an improved earnings outlook (courtesy of an excess demand for goods). China will have an excess supply of money once the Central Bank loosens. This is not happening currently: indeed, when the Central Bank supports the RMB exchange rate, it buys RMB and sells dollars. But it then removes these RMB from circulation, so they are not part of money supply any more. SECTOR WINNERS are clearly soft commodities on account of a bad weather outlook. SECTOR LOSERS remain the industrial commodities: over-investment based on China euphoria are at the root of these losses. 3. Japan outlook; Abenomics and BOJ policy A winner – for all the wrong reasons. Her Economic Time® will continue being that of an excess supply of money and an excess supply of goods. Abenomics is dead in the water: that’s because the third arrow got bent by politicians unwilling to reform. Thus, like everywhere else, the Central Bank is left to pick up the pieces. 4. China markets; weak data signalling stimulus soon? Policy response is likely in the first quarter of next year . Indeed, the weaker RMB will help importers raise margins; but I remain doubtful whether the weak RMB can lift increasingly sophisticated exports. 5. Commodity rout; how long will it go? Oil prices See the Investment Strategy of question two above. Industrial commodities will continue suffering on account of a global excess supply of goods. Oil prices: Have nothing to do with our beloved demand/supply approach. Instead, they are all driven by politics of Saudi Arabia not wanting to accommodate Iran’s desire to produce 1 million barrels of oil/day. My guess is that everyone will scramble for market share, meaning that that excess supply of oil gets exacerbated. The good news is that this represents a massive tax cut for the consumer. 6. A Fed rate hike seems more likely this month. What’s your take? I guess “yes”; but this really depends on what the FOMC decides to focus on. If it is the US economy, then a rate hike is probable. But if it switches the floorboards again and decides to focus on China and on what the World Bank as well as the IMF are pronouncing, then all bets are off. I’ll believe that future rate hikes will take place gingerly, a bit like walking on egg shells.

ETF Tactics For A Rate-Proof Portfolio

With back-to-back months of solid jobs growth and moderate inflation, the era of tightened policy might kick in as early as in two weeks, as the chance of the first rate hike in almost a decade now looks more real. The Fed is slated to increase interest rates at its upcoming December 15-16 policy meeting, but at a gradual pace. The initial phase of increase will actually be good for stocks as it will reflect an improving economy and a lower risk of deflation. Plus, higher rates would attract more capital to the country, thereby boosting the U.S. dollar against the basket of other currencies. However, since a strong dollar should have a huge impact on commodity-linked investments, a rising rate environment will also hurt a number of segments. In particular, high-dividend-paying sectors such as utilities and real estate would be the worst hit given their higher sensitivity to rising interest rates. Further, securities in capital-intensive sectors like telecom would also be impacted by higher rates. In such a backdrop, investors should be well prepared to protect themselves from higher rates. Here are number of ways to create a rate-proof portfolio that could prove extremely beneficial for ETF investors in a rising rate environment: Bet On Rate-Friendly Sectors A rising rate environment is highly beneficial for cyclical sectors like financial, technology, industrials, and consumer discretionary. Investors seeking protection against rising rates could load up stocks in these sectors through diversified or niche ETFs. Some of the broad ETFs having double-digit exposure to these four sectors are the iShares Core S&P Total U.S. Stock Market ETF (NYSEARCA: ITOT ), the Schwab U.S. Broad Market ETF (NYSEARCA: SCHB ), and the iShares Russell 3000 ETF (NYSEARCA: IWV ). Other sectors make up for a smaller part of the portfolio of these funds. Investors seeking a concentrated exposure to the particular sector could find the iShares U.S. Financial Services ETF (NYSEARCA: IYG ), the Technology Select Sector SPDR ETF (NYSEARCA: XLK ), the First Trust Industrials AlphaDEX ETF (NYSEARCA: FXR ) and the Consumer Discretionary Select Sector SPDR ETF (NYSEARCA: XLY ) intriguing. All these funds have a Zacks ETF Rank of 2 or “Buy” rating, suggesting their outperformance in the coming months. Focus On Ex-Rate Sensitive ETF The timing of interest rates hike is resulting in higher market volatility. For protection against both, the PowerShares S&P 500 ex-Rate Sensitive Low Volatility Portfolio (NYSEARCA: XRLV ) could be an ideal bet. This fund provides exposure to 100 stocks of the S&P 500 that have both low volatility and low interest rate risk. This approach looks to exclude the stocks that tend to underperform in a rising interest rate environment, and is tilted toward financials (28.1%), industrials (21.5%) and consumer staples (15.2%). As such, XRLV is a compelling choice to play the rising rate trend. Follow Niche Bond ETF Strategies Though the fixed income world will be the worst hit by rising rates, a number of ETFs like the iShares Floating Rate Bond ETF (NYSEARCA: FLOT ) and the iPath U.S. Treasury Steepener ETN (NASDAQ: STPP ) that employ some niche strategies could see huge gains. This is because a floating-rate note ETF pays variable coupon rates that are often tied to an underlying index (such as LIBOR) plus a variable spread depending on the credit risk of the issuers. Since the coupons of these bonds are adjusted periodically, they are less sensitive to an increase in rates compared to traditional bonds. On the other hand, the Steepener ETN directly capitalizes on rising interest rates and performs better when the yield curve is rising. The ETN looks to follow the Barclays US Treasury 2Y/10Y Yield Curve Index, which delivers returns from the steepening of the yield curve through a notional rolling investment in the U.S. Treasury note futures contracts. Shorten Bond Duration Higher rates have been cruel to bond investors, especially the longer-term ones, as an increase in rates has always led to rising yields and lower bond prices. This is because price and yields are inversely related to each other and might lead to huge losses for investors who do not hold bonds until maturity. As a result, short-duration bonds are less vulnerable and a better hedge to rising rates. While there are several options in this space, the SPDR Barclays 1-3 Month T-Bill ETF (NYSEARCA: BIL ), the iShares Ultrashort Duration Bond ETF (BATS: NEAR ) and the Guggenheim Enhanced Short Duration ETF (NYSEARCA: GSY ) with durations of 0.16, 0.36 and 0.17 years, respectively, seem intriguing choices. Original post