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Q1 ETF Asset Report: Safe Havens Pop; Currency Hedged Drop

The first quarter of 2016 was all about heightened global growth concerns, oscillating oil prices and ambiguity over the interest rate policy of the Federal Reserve. In particular, the acute plunge in oil prices took a toll on a number of assets worldwide. Most economies across the world, be it China, Japan, the Euro zone or the otherwise improving U.S. economy, were harried by fears of a slowdown. Most of the central Bank meetings turned out dovish and oil producers tried to strike an output freeze deal. All these efforts helped the broader market to recover in March and end the quarter on the positive note. Let’s see how a ghastly start and an upbeat ending to Q1 impacted asset growth in the ETF industry (as of March 29, 2016) (per etf.com ): It Was All-About Gold A flight to safety following a spike in volatility brightened the demand for the safe-haven asset gold (despite deteriorating fundamentals). Investors should note that a round of downbeat U.S. economic data in the early part of Q1 and the possibility of a slower-than-expected rate hike trail undermined the greenback in the first quarter, pushing most commodities ETFs (including gold) higher. Not only bullion, gold mining stocks also received considerable investor attention in the quarter. As a result, the fund tracking the gold mining equities, the Market Vectors Gold Miners ETF (NYSEARCA: GDX ), emerged as the winner in asset accumulation in Q1. GDX scooped up about $6.30 billion in assets while the yellow metal SPDR Gold Trust ETF (NYSEARCA: GLD ) pulled in $5.15 billion in assets in Q1 (read: Gold Mining ETF Investing 101 ). U.S. Treasury bonds: Another Safe Refuge Needless to say, U.S. treasury bonds were the other winners as these offer safety. Global growth issues dragged down yields on 10-year Treasury notes by 43 bps to 1.81% (as of March 29, 2016) in the quarter, leading Treasury valuation to soar. Thanks to this trend, the iShares 20+ Year Treasury Bond ETF (NYSEARCA: TLT ) and the iShares 7-10 Year Treasury Bond ETF (NYSEARCA: IEF ) amassed about $2.55 billion and $1.86 billion in the quarter (read: 5 ETFs for Portfolio Safety, Stability and Diversification ). Junk Bond ETFs Garner Attention The drive for high income and occasional improvement in the oil patch brought junk bond ETFs back into business in Q1. Plus, reasonable valuation after two soft years fetched substantial investors’ money in the quarter. Investors poured more than $2 billion and $1.7 billion respectively in the SPDR Barclays Capital High Yield Bond ETF (NYSEARCA: JNK ) and the iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEARCA: LQD ) . Apart from these, the iShares Core Total U.S. Bond Market ETF (NYSEARCA: AGG ) gathered over $3.4 billion in assets in Q1, being the third seed in the asset-gatherer list. Japan Currency Hedged-Equities ETFs: Justified Loser Currency-hedging technique failed in the quarter due to a falling U.S. dollar. This was truer for the Japan equities, as yen added more strength by virtue of its safe haven nature. Plus, Japan is an export-driven economy, being more susceptible to this adverse currency translation. This sort of movement in currencies must haven dented currency-hedged Japanese equities ETFs like the WisdomTree Japan Hedged Equity ETF (NYSEARCA: DXJ ) which has seen assets worth $2.57 billion flowing out. The problem was the same with the WisdomTree Europe Hedged Equity ETF (NYSEARCA: HEDJ ) . The fund lost $2.11 billion in assets in Q1. U.S. Equities Tumble In tune with the other risky assets, investors fled the U.S. equities’ space. The trend was more pronounced for growth equities ETFs. Tech laden Nasdaq-based PowerShares QQQ Trust ETF (NASDAQ: QQQ ) lost about $2.04 billion in the quarter, taking the third position in the asset losers’ list. The ETF was followed by the iShares Russell 1000 Growth ETF (NYSEARCA: IWF ) which redeemed about $1.96 billion in assets. Other growth sector ETFs like the First Trust NYSE Arca Biotechnology Index ETF (NYSEARCA: FBT ) and the First Trust DJ Internet Index ETF (NYSEARCA: FDN ) saw outflows of $1.76 billion and $1.32 billion in assets, respectively. Finally, the ultra-popular SPDR S&P 500 Trust ETF (NYSEARCA: SPY ) also entered the losers’ list. The fund lost around $1.23 billion in assets in the quarter. Link to the original post on Zacks.com

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