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Why Investors May Be Turning To Healthcare

By Jonathan Jones and Tom Lydon The Health Care Select Sector SPDR ETF (NYSEArca: XLV ) is up 2.3% over the past month and the largest healthcare exchange traded fund has shown some signs of awakening out of a long slumber, but some traders are not convinced, according to industry analyst ETF Trends . For XLV and rival healthcare ETFs, the good news is that the U.S. economy moving into the late-cycle phase, overall growth may slow and signs of an economic slowdown could pop up. Consequently, investors may also turn to defensive sectors that are less economically sensitive, such as health care. Looking ahead, in the years through 2024, spending growth is projected to average 5.8% and peak at 6.3% in 2020. Additionally, the actuaries calculated that around 8.4 million Americans became insured in 2014 and noted their increased use of medical services. The number of people on Medicaid is projected to increase to 78.1 million by 2024, outstripping Medicare, which is expected to have 70.3 million enrolled. Those anecdotes and data points apply to the long-term. In the near-term, some options traders are expressing doubt regarding XLV’s upside. “optionMONSTER’s tracking program detected the sale of 5,000 March 65 puts sold for $0.06 and the purchase of 5,000 April 65 puts for $0.69 today. Volume was below open interest in the near-term contracts, which expire at the end of this week, indicating that a bearish position was rolled forward by a month,” according to optionMONSTER . XLV is heavily allocated to blue-chip pharmaceuticals names, such as Dow components Johnson & Johnson (NYSE: JNJ ), Merck (NYSE: MRK ) and Pfizer (NYSE: PFE ), but the ETF also devotes more than 20% of its weight to biotechnology stocks. “Puts outnumbered calls by a bearish 4-to-1 ratio” in XLV on Wednesday, according to optionMONSTER. Health Care Select Sector SPDR Click to enlarge Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.

Leveraged Oil And Gas ETNs Dominate Inflows In March

Oil has been making headlines over the past one and a half years owing to huge swings in its prices. Oil prices took a U turn after touching a 12-year low this February. This is especially true as oil broke its near-term trading range and regained momentum, indicating that the worst might be over for the commodity (read: Oil Hits 12-Year Low: Short Energy Stocks with ETFs ). Notably, WTI crude surged near the $39 per barrel mark earlier this month while Brent jumped to more than $41 per barrel. However, prices retreated a bit over the last couple of trading sessions. With this, both WTI and Brent are up more than 6% since the start of March. Meanwhile, after touching a 17-year low on March 3, natural gas prices have also rallied so far this month. This shift made investors put huge amounts of money in oil and gas ETFs/ETNs that are wonderfully undervalued at current levels. In fact, these ETFs have seen the biggest asset inflows so far this month with the two ultra-popular ETFs – the VelocityShares 3x Long Crude Oil ETN (NYSEARCA: UWTI ) and the VelocityShares 3x Long Natural Gas ETN (NYSEARCA: UGAZ ) – accumulating nearly $9.3 billion and $6.8 billion, respectively, as per ETF.com . Oil Rebound in the Cards? The latest boost in oil price came with improving demand/supply trends. Talks of production freeze from giant oil producers including Russia and Saudi Arabia had been among the rally’s biggest drivers. Meanwhile, disruptions in supply in Iraq and Nigeria have led to a tightening of supply, which albeit is short term (read: Oil ETFs in Focus on Oil Output Freeze Talks ). Signs of decreasing production can also be seen in the U.S. With oil drilling activity falling in the country, output is expected to continue to decline in the coming weeks. However, increasing production in Iran, a strong dollar and weak global economic growth could lead to further swings in oil prices. Given the uncertain backdrop for oil, investors are seeking to make quick profit from the current trend. UWTI with a leveraged factor of 3 times has been in demand this month. This popular leveraged fund targets the energy segment of the commodity market through WTI crude oil futures contracts. It seeks to deliver thrice the returns of the S&P GSCI Crude Oil Index Excess Return and has amassed $10.62 billion in its asset base. The fund charges a higher fee of 1.35% per year and trades in high volume of 7.5 billion shares. UWTI accumulated almost 88% of its AUM in March so far and is up about 16.2% over the same time frame. In the natural gas world, UGAZ with AUM of $7.08 billion tracks the performance of S&P GSCI Natural Gas Index ER with a leveraged factor of 3 times. The fund also charges a high fee of 1.65% per year and trades in volumes of 1.2 billion shares. UGAZ has accumulated almost 96% of its AUM in March and has gained 11.6%. Investors should be careful while investing in leveraged exchange-traded notes (ETN), as these use derivatives instruments to amplify the returns of the underlying index. While this strategy is highly effective in the short term, their long-term performance could vary significantly from the actual performance of the underlying index due to a compounding effect. Link to the original post on Zacks.com

FXF Hedge To Assuage ‘Brexit’ Fears

By Max Chen and Todd Lydon Market observers are growing anxious as the United Kingdom contemplates breaking away from the European Union. However, traders may hedge the so-called Brexit risk through the Swiss franc and currency-related exchange traded fund, according to industry analyst ETF Trends . The CurrencyShares Swiss Franc Trust (NYSEArca: FXF ) , which tracks the currency movement of the Swiss franc against the U.S. dollar, has been a traditional safe-haven play in times of volatility. FXF has gained 1.3% year-to-date as global volatility pressured riskier assets. On the backdrop of greater uncertainty down the road, HSBC argues that the Swiss currency could strongly rally on the a Brexit but would not weaken if the U.K. decided to remain in the 28-country bloc, reports Katy Barnato for CNBC . The U.K. is set to hold a referendum on June 23 where the electorate will vote on whether the country should remain with the European Union. “The CHF would likely rally on Brexit, given the political and European-centric nature of the crisis ,” HSBC currency strategists, David Bloom, Daragh Maher and Mark McDonald, said in a report. “The Swiss National Bank may intervene, but we believe it would only, at best, be able to slow the move rather than reverse it.” The HSBC strategists argue that while Brexit fears have been gaining momentum, there has been little evidence that the franc has priced in Brexit risks. “This asymmetry makes the CHF the best choice as a hedge,” HSBC Strategists added. Unlike the U.K., Switzerland has never been a part of the European Union. During times of duress among Eurozone members, the Swiss franc has acted as a safe-haven hedge. For instance, during the height of the Eurozone financial crisis, the franc currency rallied against the euro. The U.S. dollar weakened against the franc currency Wednesday, trading around CHF0.9765 Wednesday. The Swiss franc appreciated against the USD Wednesday after the Federal Reserve held interest rates steady while lowering expectation for the number of hikes this year to two from a planned four rate hike. CurrencyShares Swiss Franc Trust Click to enlarge Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.