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6 ETFs To Watch In September

After a worldwide brutal stretch in August, the investing cohort must be keenly following the market movement in September. In any case, September is a seasonally cursed month having underperformed historically especially when it comes to stocks. According to the Stock Trader’s Almanac , September ended in red 55% of the time while S&P Dow Jones Indices indicated an average fall of 1.03% return over the last 87 years in September. Prelude to September There is no end to hurdles in the global market, with China being the main culprit. The world’s second-largest economy completely derailed the market in August by devaluing its currency yen by 2%, to presumably maintain export competitiveness and by revealing six-and-a-half-year low manufacturing data for August. Even repeated attempts and intervention by the Chinese policy makers in its economy and stock markets did not help and the bloodbath in global risky assets continued. The U.S. and Asian stocks had experienced a three -year low monthly performance in August. Europe saw the most horrible month since the 2011 debt debacle. Commodities crumbled to multi-year lows on demand issues and hit hard all commodity-rich nations. All three key U.S. indices met with correction in the month, though these managed to score gains in the end. In short, August got on investors’ nerves. Weak Start to September Some might have hoped for relief and rebound in this dull scenario, defying the seasonal weakness of September. But much to their shock, September unfolded on a grave note, with U.S. stocks in red on global growth issues. The contagion rooted in China’s factory sector slowdown, the end to stock purchases by Chinese government-backed funds and lack of certainty in the upcoming Fed policy ravaged the global market all over again. Most importantly, oil prices that recently impressed investors with the largest three-day oil price gain in 25 years , resumed their decline on China-led growth fears. Among the top U.S. ETFs, investors saw SPY lose about 3%; DIA shed about 2.9% while QQQ moved lower by about 3.1% on the first day of September. This makes it more important to pinpoint the ETFs that could hop or drop in September as volatility in various markets could make for some interesting near-term outlook. Vanguard Extended Duration Treasury ETF (NYSEARCA: EDV ) As September is the most speculated month in recent times for the rate lift-off, all eyes will be on the Fed meeting scheduled mid-month. A yes or no from the Fed would drag down or drive higher this long-term U.S. Treasury bond ETF. Not only this ETF, several other bond ETFs would be impacted by the Fed move. Market Vectors ChinaAMC SME-ChiNext ETF (NYSEARCA: CNXT ) China, the epicenter of the latest global chaos, should be a high-alert territory throughout September. If no further rotting news emanates from the nation, the stocks and funds might snap back on bargain hunt as they say no news is good news. But if anything wrong happens on the economic front, the ETF could be due for a wilder ride, though the chance of the latter appears less. Vanguard Total Stock Market ETF (NYSEARCA: VTI ) This all-cap U.S. equity ETF could be in watch in September. The fund was off over 2.9% to start the month and could be used as a representative of the total stock market performance in the ill-fated month. Any new China-driven sell-off or stronger Fed rate hike bet could thwart the fund and vice versa. S&P Small-Cap Consumer Staples Portfolio (NASDAQ: PSCC ) Since the consumer staples sector is known to act in investors’ defense in a rough market, this fund might come to one’s rescue in the troubled month. A small-cap exposure will help the fund mitigate the currency-translation woes, and at the same time enable it to capture the improving U.S. consumer sentiment. PSCC was down 4.4% in the last one month and up over 1.7% in the last five days (as of September 1). This was one of the best performances in the consumer staples’ segment. In fact, the consumer staples sector outdid another safe sector utility in recent times. SPDR S&P Metals & Mining ETF (NYSEARCA: XME ) The metal and mining industry has been a dreadful area as commodities were smashed on China-related worries (one of the major consumers of metals in the world) and the strength in the greenback. However, the product gained about 9% in the last five trading sessions (as of September 1, 2015) as price of some precious metals like gold brightened on their safe-haven status and the greenback lost some its strength on Fed ambiguity. So, let’s see whether further pain or gain is in store for this stressed but cheap space. United States Oil Fund (NYSEARCA: USO ) Who can forget oil? It hit September on a bearish note and will keep investors busy in assessing how it will finish the month especially given the flow of news (both good and bad) from the space. USO was down 6.8% on the first day of September and shed just 1.9% in the last one month (as of September 1, 2015). Original Post

PIMCO Total Return: 1 Bill Gross-Less Year Later

Summary The PIMCO Total Return Fund assets under management have shrunk from $293B in early 2013 to less than $100B today. The new managers of the fund were part of the investment committee working with Bill Gross during his tenure so management style should remain consistent. The fund, at least in the year-to-date period without Gross managing, has outperformed its benchmark and Morningstar category. The managers are currently retaining a cautious approach to the portfolio in anticipation of future rate hikes. In the relatively mundane world of mutual fund investing there was perhaps no news bigger than last year’s surprising announcement that Bill Gross was leaving PIMCO – the company he founded – to jump over to Janus. The move resulted in a mass exodus from Gross’ Total Return Fund (MUTF: PTTRX ). Once the largest mutual fund in the world back in 2013 with $293B in assets now has less than $100B. Many investors felt that Gross was the key that drove the engine and fled for greener pastures when he departed (although his current fund – the Janus Global Unconstrained Bond Fund (MUTF: JUCDX ) – has just $1.5B in assets). For investors that have stuck around it’s worth wondering if the “new” PIMCO Total Return fund is the same now as it was when Gross was in charge. Gross himself has said in the past that investors maintain at least a five year outlook when formulating their portfolios. However, Gross has been known to quickly change directions. This is perhaps most notable in his 2011 call on interest rates. Gross thought that interest rates would rise once QE was done and took his portfolio’s allocation in Treasury bonds all the way down to zero. Of course, interest rates went down, the fund badly underperformed its benchmarks and the flow of money out of the fund began. The new fund managers for their part have pledged largely to maintain the groupthink investment style that was part of the decision making process even when Gross was involved. Style-wise, the fund still falls into Morningstar’s intermediate term bond category where it’s been for the last many years. There are a couple of important things to note in the figure above. First, performance on a one year basis can’t really be used as a long term predictor of success but at least the new managers are off to a reasonable start. Year-to-date, the fund is beating its benchmark index by 27 basis points and the broader intermediate term bond fund category by 64 basis points. That puts Total Return in the top 15% of funds – a notable departure from recent performance that saw the fund fall into the bottom half three of the last four years. Second, turnover and trading frequency remain at comparable levels to the end of Gross’ tenure. The fund is running at a turnover rate of about 265% which is fairly comparable to the past two years’ rate of 227%. Going forward, the fund’s managers are limiting duration in the United States anticipating coming rate hikes maintaining roughly ⅔ of the portfolio in government and mortgage-backed securities. Smaller allocations to corporates, high yields and even some emerging markets adds return potential and yield to the portfolio. Consistent with its more defensive outlook, the current portfolio duration is around 4 years – much lower than the benchmark’s 5.6. Conclusion It’s understandable that investors would begin looking elsewhere following Gross’ departure. But shareholders who have stuck around have done just fine in the meantime. I think we’ve seen in the first year post-Gross that the fund is managed in a substantially similar way. The consistency of the portfolio management team that worked behind Gross is still largely intact. Gross’ decades of expertise may no longer be around but Total Return is still in able and, at least thus far, in solidly performing hands. Despite the wave of outflows that is still occurring yet today there’s no reason why the current PIMCO Total Return fund shouldn’t at least be considered for the income part of a portfolio. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Summer Madness To Nut Case? A Fall Preview Of ETFs

Summer 2015 saw investors sweating it out on the markets as the U.S. stock market ran into a correction territory thanks to the China gloom, Fed uncertainty, emerging market weakness and slumping commodities. Perhaps they should have stuck to the popular trading adage “Sell in May and Go Away”. After all, the May end to early September period has historically been known for melting profits at the bourses. This time around, the markets went berserk with performances swinging from sky-high in certain sectors to dreadful by others. Will the markets continue to shake in fall as well? Let’s check out: Housing Booms The housing market fired on all cylinders in summer thanks to soaring demand for new and rented homes, rising wages, accelerating job growth, affordable mortgage rates, and of course increasing consumer confidence. Among the most notable data, new home construction jumped to an almost eight-year high in July and existing home sales rose to an eight-year high. Further, homebuilder confidence in August surged to a level not seen in decades. The robust numbers spread optimism across the sector with the iShares U.S. Home Construction ETF (NYSEARCA: ITB ) and the SPDR Homebuilders ETF (NYSEARCA: XHB ) touching new highs on August 18 and 19, respectively. Both the ETFs have a decent Zacks ETF Rank of 3 or ‘Hold’ rating with a High risk outlook and were up 3.6% and 0.1%, respectively, over the past three months. The outperformance is likely to continue in the coming months given that the residential and commercial building industry has a solid Zacks Rank in the top 29%. China Glooms China has been roiling the global stock markets since the start of the summer with worries intensifying last month when the country surprisingly devalued its currency renminbi by 2% to ramp up exports. After that, sluggish factory activity data heightened fears of China’s hard landing and the resultant global damage. This led to terrible trading in China ETFs, which were the hot spot at the start the year. Even the latest round of monetary easing by the People’s Bank of China (PBOC) to fight the malaise did not help the stocks to recover the losses. Given the steep decline in the stocks, China ETFs had a bloodbath with the Market Vectors ChinaAMC SME-ChiNext ETF (NYSEARCA: CNXT ) and the Deutsche X-trackers Harvest CSI 500 China-A Shares Small Cap ETF (NYSEARCA: ASHS ) stealing the show. Each of the funds was down over 20% in August and nearly 53% over the past three months. CNXT has a Zacks ETF Rank of 2 or ‘Buy’ rating with a High risk outlook while ASHS has a Zacks ET Rank of 3. Rough trading in China is likely to continue at least in the near term given that the world’s second-largest economy is faltering with slower growth, credit crunch, a property market slump, weak domestic demand, lower industrial production and lower factory output. Corporate profits are also lower than a year ago. Additionally, a slew of recent measures are not helping in any way to revive investors’ confidence. Further, most analysts believe that China will continue to face a long period of uncertainty that would result in more volatility Crazy Run of ‘The Oil’ After a stable start to summer, oil saw a frenzied August, showing large swings in its prices. In fact, the commodity exhibited the maximum volatility in 24 years . This is because oil price enjoyed its biggest rally of more than 25% in the last three days of August but softened again as worries about growth in the Asian powerhouse resurfaced. U.S. crude was trading around $60 per barrel for most of the first half of summer but gradually dropped to nearly $38 per barrel on August 25 – a level not seen since 2009. Oil suddenly sprung up to over $49 per barrel for a three-day period ending August 31, and again retreated to around $46 per barrel. Even after the spectacular three-day performance, energy ETFs failed to recoup their losses made in mid-to-late summer. In particular, stock-based energy ETFs like the First Trust ISE-Revere Natural Gas Index ETF (NYSEARCA: FCG ) and the PowerShares S&P SmallCap Energy Portfolio ETF (NASDAQ: PSCE ) plunged 35.9% and 32.4%, respectively, over the past three months while futures-based energy ETFs like the iPath S&P Crude Oil Total Return Index ETN (NYSEARCA: OIL ) and the United States Oil ETF (NYSEARCA: USO ) lost 31.6% and 27%, respectively. FCG and PSCE have a Zacks ETF Rank of 4 or ‘Sell’ rating with a High risk outlook. The outlook for oil and the related ETFs look dull at present given the unfavorable demand and supply dynamics. In fact, the International Energy Agency (IEA) in its recent monthly report stated that the global oil market would remain oversupplied through 2016 though lower oil prices and a strengthening economy will boost oil demand at the fastest pace in five years. Yet, demand is currently not as strong as expected given the China slowdown and weakness in emerging markets. Automotive Thrives The U.S. automotive industry is on top gear with fat wallets, rising income and increasing consumer confidence adding adequate fuel. This is especially true as auto sales have been consecutively on the rise over the past four months with sales remaining above the healthy 17-million mark. The industry is likely to flourish going forward given that the economy is gaining traction after the first-quarter slump. Economic activity is picking up, labor market is strengthening, consumer spending is increasing, and the housing market is improving. Additionally, lower gasoline price is a huge boon to auto sales. The upside can be further confirmed by the solid Zacks Industry Rank, as about two-thirds of the industries under the auto sector have a strong Zacks Rank in the top 30%, suggesting growth ahead. Investors could ride out this surging sector with the only pure play the First Trust NASDAQ Global Auto Index ETF (NASDAQ: CARZ ) . The fund was a victim of recent broad sell-off, shedding 16.4% over the last three months. However, the ETF has a solid Zacks ETF Rank of 2 with a High risk outlook, urging investors to take advantage of the current beaten down price. Link to the original post on Zacks.com