Tag Archives: nysearcatlt

ETFs To Lose Or Gain From Solid July Job Data

The U.S. labor market continued its strength with steady job gains in July, which were enough to increase the chances of the Fed pulling its trigger on the first rate hike in almost a decade as early as next month. The Fed in its last FOMC meeting stated that it is on track to increase interest rates albeit at a slower pace if the job market shows further improvement. And this is exactly what happened. The U.S. economy added 215,000 jobs in July driven by higher construction and manufacturing employment that more than offset the collapsing mining sector. Though the number was marginally below the market expectation of 225,000, unemployment remained steady at seven-year low of 5.3%. Additionally, average hourly wages rose five cents to $24.99, bringing the year-over-year increase to 2.1%. Jobless claim were the lowest level since June 2008 at 10.4% against 10.5% in June. Further, the economy appears closer to full employment given that the number of full-time U.S. jobs as a share of total employment reached to 81.7%, marking the highest level since November 2008. The decent job data suggests that the economy continued to gain momentum in July after growing 2.3% in the second quarter. To make the case for rates hike stronger, a surging service sector, increasing business activity, higher consumer spending, a recovering retail and housing market, and rising consumer confidence point to even strong economic growth that would translate into more jobs and the resultant higher rates. ETFs to Watch The news has extended the losing streak for the Dow Jones Industrial Average to the seventh day – the longest since August 2011. Additionally, the index is currently hovering at its six-month low. As a result, a few ETFs were severely impacted by the solid jobs data while a few are expected to gain in the weeks ahead. Below, we have highlighted some that are especially volatile post jobs data and increased chances of rates hike: ETFs to Lose SPDR Gold Trust ETF (NYSEARCA: GLD ) Gold will continue to remain under immense pressure as higher interest rates would diminish gold’s attractiveness since the yellow metal does not pay interest like fixed-income assets and the product tracking this bullion like GLD will lose further. The fund tracks the price of gold bullion measured in U.S. dollars, and kept in London under the custody of HSBC Bank USA. It is the ultra-popular gold ETF with AUM of $23.5 billion and average daily volume of around 5.7 million shares a day. Expense ratio came in at 0.40%. The fund is down 7.9% so far in the year and has a Zacks ETF Rank of 3 or ‘Hold’ rating. iShares MSCI Emerging Markets ETF (NYSEARCA: EEM ) As the Fed moves closer to interest rate hike, emerging markets will slump further. The most popular emerging market ETF – EEM – lost about 7% in the year-to-date timeframe and has seen huge capital outflow which has pulled its total asset base down to $24.2 billion. The fund tracks the MSCI Emerging Markets Index and charges 68 bps in annual fees from investors. Holding 847 securities, the product is widely spread out across various securities but is tilted toward the financial sector at 29.3%, followed by information technology (17%). Among the emerging countries, China takes the top spot at 23.6% while South Korea and Taiwan round off the next two spots with double-digit exposure each. The fund has a Zacks ETF Rank of 3. iShares 20+ Year Treasury Bond ETF (NYSEARCA: TLT ) The U.S. government bonds and ETFs tracking the long end of the yield curve are the most vulnerable to higher interest rates. The ultra-popular long-term Treasury ETF – TLT – tracks the Barclays Capital U.S. 20+ Year Treasury Bond Index and has AUM of $4.9 billion. Expense ratio came in at 0.15%. Holding 29 securities in its basket, the fund focuses on the top credit rating bonds with average maturity of 26.9083 years and effective duration of 17.2035 years. The fund is almost flat from a year-to-date look and has a Zacks ETF Rank of 3. ETFs to Gain PowerShares DB USD Bull ETF (NYSEARCA: UUP ) A rise in interest rates will pull in more capital into the country and lead to further appreciation of the U.S. dollar. UUP is the prime beneficiary of the rising dollar as it offers exposure against a basket of six world currencies – euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. This is done by tracking the Deutsche Bank Long U.S. Dollar Index Futures Index Excess Return plus the interest income from the fund’s holdings of U.S. Treasury securities. In terms of holdings, UUP allocates nearly 58% in euro while 25.5% collectively in Japanese yen and British pound. The fund has so far managed an asset base of $1.3 billion while sees an average daily volume of around 2.6 million shares. It charges 80 bps in total fees and expenses and has added 6.5% in the year-to-date time frame. The fund has a Zacks ETF Rank of 2 or ‘Buy’ rating. Deutsche X-trackers MSCI EAFE Hedged Equity ETF (NYSEARCA: DBEF ) The strength in the greenback is compelling investors to recycle their portfolio into the currency hedged ETFs. For those seeking exposure to the developed market with no currency risk, DBEF could be an intriguing pick. The fund follows the MSCI EAFE U.S. Dollar Hedged Index and holds 913 securities in its basket with none accounting for more than 1.82% share. However, it is skewed toward the financial sector, which makes up for more than one-fourth of the portfolio, while consumer discretionary, industrials, health care, and consumer staples round off the top five with double-digit exposure each. Among countries, Japan takes the top spot at 21%, closely followed by United Kingdom (19%), France (10%) and Switzerland (10%). The ETF has AUM of $14.4 billion and trades in a solid volume of more than 4.7 million shares a day. It charges 35 bps in fees per year from investors and has a Zacks ETF Rank of 3. Link to the original article on Zacks.com

Dual Momentum August Update

Scott’s Investments provides a free “Dual ETF Momentum” spreadsheet, which was originally created in February 2013. The strategy was inspired by a paper written by Gary Antonacci and available on Optimal Momentum . Antonacci’s book, ” Dual Momentum Investing: An Innovative Strategy for Higher Returns with Lower Risk “, also details Dual Momentum as a total portfolio strategy. My Dual ETF Momentum spreadsheet is available here , and the objective is to track four pairs of ETFs and provide an “Invested” signal for the ETF in each pair with the highest relative momentum. Invested signals also require positive absolute momentum, hence the term “Dual Momentum”. Relative momentum is gauged by the 12-month total returns of each ETF. The 12-month total returns of each ETF is also compared to a short-term Treasury ETF (a “cash” filter) in the form of the iShares Barclays 1-3 Year Treasury Bond ETF (NYSEARCA: SHY ). In order to have an “Invested” signal, the ETF with the highest relative strength must also have 12-month total returns greater than the 12-month total returns of SHY. This is the absolute momentum filter, which is detailed in depth by Antonacci, and has historically helped increase risk-adjusted returns. An “average” return signal for each ETF is also available on the spreadsheet. The concept is the same as the 12-month relative momentum. However, the “average” return signal uses the average of the past 3-, 6-, and 12- (“3/6/12”) month total returns for each ETF. The “invested” signal is based on the ETF with the highest relative momentum for the past 3, 6 and 12 months. The ETF with the highest average relative strength must also have an average 3/6/12 total returns greater than the 3/6/12 total returns of the cash ETF. Portfolio123 was used to test a similar strategy using the same portfolios and combined momentum score (“3/6/12”). The test results were posted in the 2013 Year in Review and the January 2015 Update. Below are the four portfolios, along with current signals: (click to enlarge) As an added bonus, the spreadsheet also has four additional sheets using a dual momentum strategy with broker-specific, commission-free ETFs for TD Ameritrade, Charles Schwab, Fidelity, and Vanguard. It is important to note that each broker may have additional trade restrictions, and the terms of their commission-free ETFs could change in the future. Disclosures: None. Share this article with a colleague

Grexit Fears And Fed Meeting Put These ETFs In Focus

This week started with a rough stock market session as major benchmarks finished the day in the red. The Dow Jones Industrial Average fell more than 200 points in early Monday trading and was down 0.6% at the close. In fact, the steep decline eroded all the gains made this year and sent the Dow Jones into red from the year-to-date look as well. The downswing has mainly been blamed on growing concerns over the future of Greece in the Euro zone. Tensions on Rise The latest talk between Greece and its international creditors collapsed yet again last weekend, sparking off threats of default and a possible Greek exit from the Euro zone. The move sent panic alarms ringing all over the globe and renewed uncertainty in the global stock market. Notably, the Greek bourse fell 4.9% on Monday trading session, spreading the contagion across the European, Asian and U.S. markets. Added to the Greece concern is the Federal Reserve’s two-day meeting, which ends on Wednesday. Investors have been cautious and are keeping a close eye at this meeting to find out whether the Fed Chair Janet Yellen modifies the language regarding the rates hike or adds some color to the decision. While the Fed will not raise interest rates at this meeting, a spate of better-than-expected economic data has raised speculation for a hike in September or October. The Fed is expected to release its policy statement, economic outlook and interest rate forecasts at the end of the ongoing meeting. Market Impact The events have led to risk-off trading with lower risk securities, including precious metals and bonds, in vogue. Meanwhile, the broad U.S. market fund (NYSEARCA: SPY ) saw volume that exceeded 124 million shares on the day, well above average shares of roughly 105 million. A few ETFs were severely impacted by the news of the Greece deal failure while a few were in focus ahead of the Fed meeting. Below are four ETFs which are especially volatile in the wake of the Greece crisis and amid uncertainty regarding the timing of the interest rates hike: Global X FTSE Greece 20 ETF (NYSEARCA: GREK ) The Greece ETF was the worst performer on the day, losing 6.5% on elevated volume of 1.5 million shares compared to 815,000 shares on average. The fund tracks the FTSE/ATHEX Custom Capped Index and is home to a small basket of 21 companies. It is heavily concentrated on the top firm – Coca Cola HBC – at nearly 21% while other firms make up for less than 10% share. Financials takes the top spot at 25% in terms of sector holdings, followed by consumer staples (21%), consumer discretionary (16%) and telecom (10%). The product has AUM of $330 million and charges 61 bps in fees per year from investors. iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA: VXX ) While volatility products have been terrible performers over the medium and long terms due to a contangoed market and a steep roll cost, they are intriguing picks during periods of turmoil or uncertainty. That being said, VXX gained 4.2% in the session while volume hit 56.4 million shares, well above the 39.1 million average. The note has amassed $1.1 billion in AUM and charges 89 bps in fees per year. The ETN focuses on the S&P 500 VIX Short-Term Futures Index, which reflects implied volatility in the S&P 500 Index at various points along the volatility forward curve. It provides investors with exposure to a daily rolling long position in the first and second months VIX futures contracts. SPDR Gold Trust ETF (NYSEARCA: GLD ) Gold is often viewed as a store of value and a hedge against market turmoil. The product tracking this bullion like GLD could be an interesting pick to play the market turbulence. The fund tracks the price of gold bullion measured in U.S. dollars, and kept in London under the custody of HSBC Bank USA. It is the ultra-popular gold ETF with AUM of $26.7 billion and expense ratio of 0.40%. However, the ETF added just 0.4%, exchanging more than 500,000 shares in hand. The upside was capped in anticipation of a hawkish stance in the Fed meeting that would further boost the dollar against the basket of major currencies and dampen the safe haven appeal across the board. iShares 20+ Year Treasury Bond ETF (NYSEARCA: TLT ) The U.S. government bonds tracking the long end of the yield curve often carry a safe haven status. The flight-to-safety on Greece default concerns led these bonds higher in early trading but soon eroded most of the gains on rising rates concern. As such, the ultra-popular long-term Treasury ETF – TLT – was up only 0.2% on the day on below average daily volume. It tracks the Barclays Capital U.S. 20+ Year Treasury Bond Index and has AUM of over $4.3 billion. Expense ratio came in at 0.15%. Holding 30 securities in its basket, the fund focuses on the top credit rating bonds with average maturity of 26.90 years and effective duration of 17.20 years. Original post