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ETF Strategies To Gain From In The Rest Of 2016

After a lackluster patch, the broader market showed some strength in Q2, but occasional volatility is still showing up. The S&P 500 is striving to stay in the green from the year-to-date look (as of May 18, 2016) (read: S&P 500 Again Shows Weakness: Go Short with These ETFs ). Several marked changes were noticed during this time, including the solid comeback in oil prices and subtle stabilization in the Chinese economy. But it seems that the S&P 500 is far from seeing its past success in the rest of this year. Though the U.S. economy started taking root lately and is expected to see upbeat growth in Q2, volatility will likely rule the market. Imminent ‘Brexit’ vote, further Fed rate hikes and the U.S. election in November will definitely not let the market stay calm (read: British ETFs in Focus on Brexit Talks ). Investors should note that though the Fed hike symbolizes a steady U.S. economy, the imminent reaction is a crash in the stock market in fear of a dearth in cheap money inflows. Against this backdrop, investors may want to know some worthwhile investing strategies. For them we highlight the trending policies in the market and some profitable ETF bets. Analysts Muted on Stocks Bank of America believes that the S&P 500 could slip to its February lows, while Morgan Stanley has applied the famous maxim “Sell in May and go away” to stocks at least till November. Goldman Sachs has also cut its outlook on equities to “neutral” over the coming one year. Now Goldman has gone “neutral” on U.S. (upgraded), Europe (downgraded), Japan (downgraded) and Asia ex-Japan equities. Europe and Japan definitely bear the burden of stronger currencies and weaker financial sectors due to the ongoing negative interest rates. On the other hand, U.S. equities may suffer from choppy earnings, overvaluation concerns and the Fed move. The ripple effects of any crash in the S&P 500 may shake stocks worldwide. So, it’s better to bet on the ProShares Short S&P 500 ETF (NYSEARCA: SH ) , the ProShares Short MSCI Emerging Markets ETF (NYSEARCA: EUM ) , or the ProShares Short MSCI EAFE ETF (NYSEARCA: EFZ ) . Time for Money Market Instruments? As per Goldman, cash can be an overweight pick this year due to fewer chances of a Fed rate hike. In such a situation, investors can bet on cash-like money market ETFs like the Guggenheim Enhanced Short Duration Bond ETF (NYSEARCA: GSY ) and the SPDR Barclays 1-3 Month T-Bill ETF (NYSEARCA: BIL ) . One thing is for sure, a rate hike will hit both stocks and bonds. This is because as the Fed enacts, yields will jump pushing bond prices down. Even Goldman is worrying about the interest rate shock. Investment Grade Corporate Bonds: Safety + Yield Investors can also consider long-term corporate bond ETFs like the Vanguard Long-Term Corporate Bond Index ETF (NASDAQ: VCLT ) for higher yields than treasuries. Goldman Sachs now expects its year-end 10-year yield to be 2.4%, down from the 2.75% it had projected in the first quarter. Bank of America Merrill Lynch pared down its forecast for the yearend 10-year yield to 2% from 2.65% at the start of the year. Morgan Stanley projects a lower 10-year yield at 1.75%, down from 2.7% when the year had started. So, the drive for higher yield is expected in the marketplace. However, since corporate bonds are riskier in nature, honing in on investment-grade ones is a prerequisite. After all, corporate leverage is peaking, so investors need to be aware of default risks. VCLT yields 4.30% annually (as of May 18, 2016). Play Rebound in Oil; but Tread Cautiously Oil prices have seen a lot in last two years. Now that things are turning in favor for oil with shrinking supply glut and a possible recovery in demand, a play on oil is warranted. With oil, investors can also bet on high-yield bond ETFs like the AdvisorShares Peritus High Yield ETF (NYSEARCA: HYLD ) . This is because of the fact that the U.S. energy companies are closely tied to the high-yield bond market, with the former comprising a considerable amount of junk bond issuance. Volatility to Crack the Whip: Play Risk Aware Volatility is expected to be strong in 2016. Investors can deal with this in various ways. While low volatility ETFs like the PowerShares S&P 500 Low Volatility Portfolio ETF (NYSEARCA: SPLV ) can be an option, defensive ETFs like the QuantShares U.S. Market Neutral Anti-Beta ETF (NYSEARCA: BTAL ) and risk-aware ETFs like the SPDR SSgA Risk Aware ETF (NYSEARCA: RORO ) can be tapped too. And last but not the least in queue are volatility ETFs themselves such as the C-Tracks on Citi Volatility Index ETN (NYSEARCA: CVOL ) and the ProShares VIX Short-Term Futures ETF (NYSEARCA: VIXY ) . Notably, as the name suggests, volatility products are quite rowdy in nature and thus suit investors with a short-term notion. Gold to Hit $1,400? Steep Fed tightening or not, the gold market looks shiny thanks to global political risks this year. Along with many other optimistic analysts, Denmark’s Saxo Bank A/S turned bullish on gold and projected that the price may hit as high as $1,400 this year. This invariably puts gold ETFs like the SPDR Gold Trust ETF (NYSEARCA: GLD ) in focus. Link to the original post on Zacks.com

Precious Metals Get The Better Of Equities: 5 Mutual Funds To Buy

Of late, gold and other precious metals are trouncing equities as weaker economic growth both in the U.S. and globally continue to dent investors’ sentiment. In times of economic upheaval, investors dump equities to look for safe haven assets, and precious metals are well suited to serve this purpose. Lower interest rate environment across the globe is also luring investors to bet on precious metals. After seeing three back-to-back years of losses, these metals have rallied about 20% this year. Hence, investment in mutual funds having exposure to precious metals will surely be a prudent choice. Domestic Economic Growth Weak U.S. economic growth stalled in the first three months of the year since businesses and consumers turned cautious with their spending. The economy expanded at an annualized rate of 0.5% in the first quarter, its weakest quarterly growth in two years, according to the Commerce Department. Into the second quarter, things aren’t looking bright either. The battered U.S. manufacturing sector did stabilize a bit in April, but is yet to regain full health, while consumer spending may have further experienced a slowdown in April. The ISM manufacturing index dropped to 50.8 in April from 51.8 in March. The Reuters/University of Michigan consumer sentiment index, on the other hand, declined to 89.0 in April from 91.0 in March. When a country’s growth prospects are headed south, investors mostly get out of risky investments like stocks. By the end of April, investors pulled money out of equities at the fastest pace since last summer’s market rout and poured money into precious metals, which boast of a safe haven appeal. Precious metals tend to retain their value and even increase their value during times of market downturn. Let’s also not forget that we are in May, which is predominantly a bad month for investment. Investors as it is tend to offload their stock holdings this month and reenter the markets in fall. Global Growth Uncertainties And it’s just not a domestic malice. Global growth worries also continue to linger on. Soft Chinese and British factory data rekindled fears of slowing global growth. In China, manufacturing activity slipped last month. China’s official manufacturing PMI fell to 50.1 in April from 50.2 in March. The production index, new orders index and the new export orders index all ticked down in April. British factory output for the month of March was abysmal. Factory output declined 1.9% than a year earlier, its steepest fall since May 2013, according to the Office for National Statistics. Shut down in the steel industry led to such broad-based declines. Meanwhile, the European Commission cautioned about slow economic growth among many large countries. All these factors boosted the appeal for precious metals. Fed Rate Hike Not in the Cards Coming back to domestic shores, expectations that the Federal Reserve won’t raise rates at the June meeting lifted precious metals. The latest report on weak job creations in April made the Fed cautious about raising rates sooner. The U.S. economy created a total of 160,000 jobs in April. This increase in hiring was the slowest since September. Moreover, the labor force participation rate declined to 62.8%, which could mean that people found it a bit more difficult to get jobs. The Fed is already cautious about raising rates in the near term as the U.S. inflation rate in the first quarter came in way below its desired level. Lower interest rates generally tend to boost precious metals, as it makes yield-bearing assets such as U.S. Treasuries less attractive. Lower rates also adversely affect the dollar, which in turn raises the appeal for precious metals. Add to this, central banks across the world including Japan, Sweden, Switzerland, Denmark and Europe are adopting negative interest rates. This is why investors are snapping up gold this year. Top 5 Precious Metals Mutual Funds to Invest In As mentioned above, concerns about domestic and global economic growth along with near-zero and even negative interest rates around the world are playing a major role in helping precious metals gain at the expense of equities. In fact, when it comes to the yellow metal, banking behemoths such as The Goldman Sachs Group, Inc. (NYSE: GS ) and JPMorgan Chase & Co. (NYSE: JPM ) have turned bullish. Goldman Sachs increased its three, six and twelve-month forecasts to $1,200, $1,180 and $1,150 an ounce from an earlier prediction of $1,100, $1,050 and $1,000 per ounce, respectively. JPMorgan Private Bank’s Solita Marcelli has said that “We’re recommending our clients to position for a new and very long bull market for gold.” Banking on these bullish sentiments, it will be judicious to invest in mutual funds that have considerable exposure to precious metals. We have selected five such precious metals mutual funds that have given impressive year-to-date returns, boast a Zacks Mutual Fund Rank #1 (Strong Buy) or #2 (Buy), offer a minimum initial investment within $2,500 and carry a low expense ratio. Funds have been selected over stocks, since funds reduce transaction costs for investors. Funds also diversify their portfolio without the numerous commission charges that stocks need to bear. The American Century Global Gold A (MUTF: ACGGX ) invests the majority of its assets in companies that are engaged in mining, processing, distributing and exploring in gold. ACGGX’s year-to-date return is 75.4%. Annual expense ratio of 0.92% is lower than the category average of 1.44%. ACGGX has a Zacks Mutual Fund Rank #1. The Fidelity Advisor Gold A (MUTF: FGDAX ) invests a large portion of its assets in securities of companies engaged in gold-related activities, and in gold bullion or coins. FGDAX’s year-to-date return is 65.9%. Annual expense ratio of 1.2% is lower than the category average of 1.44%. FGDAX has a Zacks Mutual Fund Rank #1. The Franklin Gold and Precious Metals Advisor (MUTF: FGADX ) invests the majority of its assets in securities of gold and precious metals operation companies. FGADX’s year-to-date return is 70.7%. Annual expense ratio of 0.84% is lower than the category average of 1.44%. FGADX has a Zacks Mutual Fund Rank #2. The Deutsche Gold & Precious Metals A (MUTF: SGDAX ) invests a major portion of its assets in companies engaged in activities related to gold, silver, platinum or other precious metals. SGDAX’s year-to-date return is 69.4%. Annual expense ratio of 1.25% is lower than the category average of 1.44%. SGDAX has a Zacks Mutual Fund Rank #1. The Wells Fargo Precious Metals A (MUTF: EKWAX ) invests a large portion of the fund’s net assets in investments related to precious metals. EKWAX’s year-to-date return is 69.8%. Annual expense ratio of 1.1% is lower than the category average of 1.44%. EKWAX has a Zacks Mutual Fund Rank #2. Link to the original post on Zacks.com

Crash Imminent Warning Removed By NIRP Crash Indicator

The NIRP Crash Indicator’s signal changed from its pre-crash or crash imminent Orange to its Yellow cautionary reading level on the close of the market on May 9, 2016. The signal had gone from Yellow to Orange prior to the U.S. stock market’s opening on April 28. During the eight day period that the indicator’s reading was Orange ended on May 9, 2016, the S&P 500 went from 2095.15 to 2058.69, a decline of 1.7%. The signal went to Orange from Yellow because the exchange rates of the yen versus both the euro and the US dollar had stabilized during the week ended May 6, 2016. Additionally, both the euro and the dollar appreciated by more than 1.1% versus the yen on Monday May 9, 2016. Please note: For the NIPR Crash indicator to change from the crash imminent Orange or a crash Red reading to Yellow requires that the exchange rate between the yen and dollar be stable for an extended period of time or that the dollar and euro advance significantly versus the yen. An increase in the indicator’s reading from Yellow to Orange requires a steady advance or a significant one day advance for the yen versus the dollar. The NIRP Crash Indicator was developed in February 2016, from my research on the Crash of 2008. My research revealed the metrics that could have been used to predict the Crash of 2008 and its V-shaped reversal off of the March 2009 bottom. See my Seeking Alpha “Japan’s NIRP Increases Probability of Global Market Crash” March 4, 2016 report. The metrics are now powering the indicator. Information about the NIRP Crash Indicator and the daily updating of its four signals ( Red: Full-Crash; Orange: Pre-Crash; Yellow: Caution; Green: All-Clear) is available at www.dynastywealth.com . Since inception the NIRP Crash Indicator’s signals have proven to be very reliable. Throughout the entire month of March, the signal for the NIRP Crash Indicator had remained at the cautionary Yellow and the S&P 500 experienced little volatility as compared to the extremely volatile first two months of 2016. For the month of March, the S&P 500 increased by 4%. The indicator’s reading went from Yellow to Orange after the market’s close on Friday April 1, 2016 . For the following week ended April 8, 2016, the S&P 500 experienced its most volatility since February of 2016 and closed down 1.5% for the week. The signal’s second Orange reading occurred before the market’s April 28, 2016 open. From the Thursday, April 28 open to the Friday, April 29 close, the S&P 500 declined by 1.2%. The S&P 500 (NYSEARCA: SPY ) and the Dow 30 (NYSEARCA: DIA ) ETFs closing at their lowest prices since April 12, 2016 on April 29. See also my SA post “NIRP Crash Indicator’s Sell Signals Very Reliable for April 2016″ May 3, 2016. The primary metric powering the NIRP Crash Indicator are sudden increases in volatility for exchange rates of the yen versus the dollar and other currencies. The significant appreciation in the yen versus the dollar in 2008 accurately predicted the crash of 2008, and the recent declines of the markets to multi-year lows in August of 2015 and February 2016. In my April 11, 2016 ” Yen Volatility Is Leading Indicator For Market Sell-Offs ” SA post and my video interview below entitled “Yen Volatility Causes Market Crashes”, I provide further details on the phenomenon of the yen being a leading indicator of market crashes. The rationale for the for yen volatility or its appreciating significantly versus the dollar being a leading indicator of crashes is because the Japanese yen and the U.S. dollar are the world’s two largest single country reserve currencies. For this reason, the yen is the best default safe-haven currency utilized by investors during any U.S. and global economic and market crises. When crises unfold, historically the U.S. dollar — by far the world’s most liquid and largest safe-haven currency — is susceptible to dramatic declines until the storm has passed. Savvy investors know that the U.S. is, unquestionably, considered the world’s leading economy and markets. They know that upon a crash of the U.S. stock market, the initial knee-jerk reaction would be a simultaneous crash of the U.S. dollar versus the world’s second leading single-nation currency. The yen is currently the default-hedge currency. Even though the euro, arguably, ranks with the U.S. dollar as the world’s top reserve currency, it is not the preferred hedge against the greenback. The euro is shared by 19 of the European Union’s member countries that have wide-ranging social and economic policies, and political persuasions. For this reason, and also because Japan is considered to be one of the most fiscally conservative countries on the planet, the default currency is the yen. The U.S. dollar does not experience extended crashes versus the Swiss franc and the British pound during times of crises because each of the underlying countries has economies much smaller than Japan’s. From my ongoing research coverage of the spreading negative rates and the devastating effect that they could potentially have on the global banking system, the probability is high that the major global stock indices including the S&P 500 will begin a significant decline by 2018 at the latest. My April 11, 2016 article entitled, “Negative Rates Could Send S&P 500 to 925 If Not Eliminated” , provides details about the potential mark down of the S&P 500 likely being in stages. I highly recommend you also watch my 9 minute, 34 second video interview with SCN’s Jane King entitled “Why Negative Rates could send the S&P 500 to 925”. In the video, I explain the math behind why the S&P 500’s declining to below 1000 may be the only remedy to eliminate the negative rates. The video also reveals some of my additional findings on the crash of 2008. 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.