Tag Archives: datetime-local

6 ETFs To Play In Q1

The year 2016 unfolded amid a myriad of woes and huge uncertainty. The woes stemmed mainly from the developed foreign economies due to growth issues and uncertainties in the homeland emanating from the speculation over the speed and quantum of the Fed rate hike throughout 2016. The Fed enacted a meager hike at the tail end of 2015 and as of now, the investing world is expecting four more hikes in 2016, if everything goes well. However, things could change any point of time along with global or domestic market occurrences (read: ETF Tactics for a Rate-Proof Portfolio ). The broader global indices were mostly in red in 2015 snapping the bull market trend seen in earlier years. Now, all eyes will be on how the year 2016 fares on the bourses. Let’s not move too further ahead and instead focus on the prospective ETF winners of the first quarter of 2016. To do this, we have relied on both seasonality of the asset class and the earnings performance of the equity sectors. iShares U.S. Financials ETF (NYSEARCA: IYF ) The operating environment for financial companies is presently benign thanks to the Fed liftoff. In a rising rate environment, financial companies’ net interest margin should also rise. In any case, U.S. banks are in a better shape right now (read: Guide to the 7 Most Popular Financial ETFs ). Finance is expected to be a growth driver in the fourth-quarter 2015 earnings season which is already underway. The sector is expected to score the second-best earnings growth of 6.8%. Finally, as per Equity Clock, the financial sector, especially the banks, enjoy seasonality in the first quarter of every year. iShares Transportation Average ETF (NYSEARCA: IYT ) Equity Clock also reveals that the first quarter is beneficial for airlines and railroads with seasonality kicking in from the end of January and extending till early May. Plus, stepped-up economic activities and cheap fuel are still there to drive up transportation stocks. The transportation sector is expected to report 12.1% growth in earnings on just a 1% decline in revenues. One way to play this trend is with IYT. The ETF tracks the Dow Jones Transportation Average Index, giving investors exposure to a small basket of close to 25 securities. Utilities Select Sector SPDR ETF (NYSEARCA: XLU ) Gas utilities are normally in demand in the cold-stricken first quarter. Though utilities are likely to be on the downside following the Fed liftoff, but no material hike in the long-term interest rates since then made the sector a winner last one month compared with several glamorous and in-vogue sector ETFs like the Consumer Discretionary Select Sector SPDR ETF (NYSEARCA: XLY ) and the Technology Select Sector SPDR ETF (NYSEARCA: XLK ) . The fund added 0.3% in the last one month (as of December 31, 2015) while XLY and XLK were down over 4.2% and 3.4%, respectively, during the same timeframe. Market Vectors Retail ETF (NYSEARCA: RTH ) According to Equity Clock , seasonal strength for the consumer discretionary sector stretches from October 17 to April 12. The sector is expected to post earnings growth of 2.4% in Q4, much better than the consumer discretionary sector’s expected earnings decline of 4.8%. Its sales expectation is also steady at 6.4% for Q4, again better than 1.4% growth expected from the consumer discretionary space. More jobs and cheaper fuel should help these sectors to grow. PowerShares DB USD Bull ETF (NYSEARCA: UUP ) The greenback is yet another asset which enjoys the tailwind of seasonality in the first quarter, per analysts. In any case, this U.S. dollar ETF lost over 1.2% in the last one month (as of December 31, 2015) giving the product a leeway for rally. The key logic behind the ascent as per Investopedia is that investors must have repatriated money at the yearend, resulting in a weaker dollar and then again bet on the dollar in the New Year. Also, in 2016, the U.S. dollar should have one more reason – U.S. policy tightening – to celebrate. iShares Russell 2000 ETF (NYSEARCA: IWM ) Small-cap stocks are the barometer of domestic economic health. So, when the U.S. economy shifted gear in December and experienced policy normalization, most eyes moved to small-cap stocks in order to cash in on the U.S. economic growth momentum. Plus, Russell 2000 has a history of rallying in January and February, as per Equity Clock. In any case, if dollar gains strength, investors will definitely bet on small-cap stocks as larger caps are more vulnerable to the dollar strength. Link to the original article on Zacks.com

Do ETFs Cause Market Volatility?

My colleague Russ Koesterich has said it before: Market volatility is the new normal. And when markets are volatile, we see volatility in the prices of exchange traded funds (ETFs). Some investors may wonder if the ETF is simply showing us the market volatility, or if it is actually causing it. Let’s take a closer look. We know that ETFs trade on the open market. Let’s pretend that we’re monitoring an ETF that is listed in the US but invests in Asian stocks. If we buy that ETF and keep an eye on its price when the Asian market is closed, we can see that the price of the ETF still moves throughout the day, even though the Asian market is closed. That’s because news and information in the U.S. and European markets impacts the value of Asian market stocks, and thus the ETF that holds those stocks. When the Asian market opens again, we see the local stocks move to reflect this new information, and the ETF’s price realigns with the local market. We call this “price discovery”-the ETF is showing you where the market should be priced at a given point in time, even if that market is closed. If all markets are open at the same time, this form of price discovery generally doesn’t take place. ETFs and Market Volatility ETFs by nature have created entries into the market that investors wouldn’t normally have otherwise. Some speculate that now more investors have access to markets, there is more trading, and this can actually cause market volatility. We’ve done a lot of research on this and found that ETFs do not cause market volatility. Instead, their price fluctuation is simply exposing already-existing market volatility, adding transparency to the ETF’s price fluctuations. Much like our Asian equity ETF example above, the ETF didn’t increase the volatility of the local market, it just showed you where that market was valued even when it was closed. At the end of the day, a stock is worth what it’s worth and a bond is worth what it’s worth. ETFs are going to trade at a price that reflects where you can trade in the ETF’s underlying market. They simply reflect prices-they don’t cause them to move. A Look at Bond ETFs If we shift from stocks to bonds and look at fixed income ETFs, we must consider two things: first, that an ETF is a portfolio that trades intraday; and second, that it’s difficult to see intraday transactions in the bond market. Most investors have difficulty seeing bond price movements intraday; there is no ticker tape you can look to, and most data sources are delayed or hard to access. But if you have a bond ETF, the dynamic changes: The nature of this investment allows you to see price fluctuations intraday. A great example of this is “Taper Tantrum” that began in May 2013. Interest rates in the U.S. spiked suddenly at this time, and a lot of different bond investments dropped in price, high-yield ETFs included. Investors who were holding high-yield ETFs wondered why the price was falling. A quick look at the high-yield ETF market revealed that other high yield ETFs were dropping in price. If you could look at high yield bond trades you would have seen that they were declining as well. Most investors couldn’t see both the high yield bond market and the ETF market, but if they could they would see that the high yield ETF was reflecting the price drops in individual high yield bond trades. It’s not that the ETFs caused the dip; it’s that their prices simply reflected what was already there, but hidden. And this is another form of price discovery. The bond market and the bond ETF are both trading at the same time, but one is hard to see while the other is more visible. The ETF helps investors discover what is really happening in fixed income markets throughout the day. What are your questions about ETFs and volatility? Ask them here. This post originally appeared on the BlackRock Blog.

CMG Capital Launches Global Macro Strategy Fund

CMG hit the market last month with its third alternative mutual fund: The CMG Global Macro Strategy Fund (MUTF: PEGAX ). The fund pursues its investment objective of capital appreciation by investing in global currency, government bond and equity markets. CMG Capital Management’s President and Chief Compliance Officer PJ Grzywacz and Head of Due Diligence and Investment Research Michael Hee are responsible for the day-to-day operations of the fund as its portfolio managers. Multi-Factor Approach CMG’s new fund combines a global macro strategy with a fixed-income strategy. The global macro strategy uses multiple factors and quantitative techniques to analyze macroeconomic and financial indicators to determine long and short positions to capture returns related to trends in currency exchange rates, equity indices and government bonds. The fixed-income strategy invests in investment-grade bonds and is designed to generate interest income, capital appreciation, and diversify returns from those of the global macro strategy. The fund’s strategy is “global” in that, under normal circumstances, it invests at least 40% of its assets in companies domiciled outside the United States. While the global macro strategy seeks exposure to foreign currency, equity index and government bond-linked securities, funds, and/or derivatives, it achieves these exposures by investing in limited partnerships, limited liability companies, pooled investment vehicles, and underlying funds. These underlying funds may include currency-, equity-, and government-bond-linked ETFs, mutual funds, futures, and swap contracts. Fund Details The CMG Global Macro Strategy Fund is “non-diversified,” which means it can invest a greater percentage of its assets in one issuer than a “diversified” fund can. Shares of the CMG Global Macro Strategy Fund are available in A (PEGAX) and I (MUTF: PEGMX ) classes. Investment management fees are 1.00%. The A shares have a 2.85% net-expense ratio and a $5,000 minimum initial investment. The I shares have a 2.60% net-expense ratio and a $15,000 minimum initial investment. For more information, view the fund’s prospectus . Jason Seagraves contributed to this article.