Tag Archives: economy

Forget China, Buy These 3 India ETFs Instead

While a flurry of weak Chinese data escalated concerns regarding sluggish global growth, it’s India that showed promises to outpace other major economies over the next few years. The World Bank along with the International Monetary Fund (IMF) indicated that India was the world’s fastest growing economy in 2015 and will continue to hold that position for the next three years, easily surpassing the former leader, China. In this scenario, ETFs having significant exposure to India may provide an excellent opportunity for investors to tap this positive trend. Weak Chinese Economy The sluggish growth condition in China remained one of the major concerns over the past one year. Recently released economic data showed that the Chinese economy is still struggling to provide a congenial economic environment. While the Caixin manufacturing PMI finished below 50 for the 10th straight month in December, the Caixin China services purchasing managers’ index PMI dropped to 50.2 in December from 51.2 in November. Multiple rate cuts and devaluations of the yuan over the past one-year period failed to resuscitate the economy. Also, the World Bank reduced its outlook for Chinese GDP growth in 2016 by 30 percentage points to 6.7%, below last year’s estimated growth rate of 6.9%, which was also below the June forecast of 7.2%. The bank also predicted that the economy may grow at a slower pace of 6.5% over the next two years. Blaming the weak Chinese economy, the bank also reduced its global growth rate forecast for 2016 by 0.4 percentage points to 2.9%. However, it remained above 2015’s estimated growth rate of 2.4%. India in a Bright Spot The World Bank projected the Indian economy to expand at a rate of 7.8% this year and 7.9% over the next two years. While the economy registered a GDP growth rate of 7.4% in the July-September quarter, the economy is expected to continue this positive trend to end the current fiscal year with a growth pace between 7% and 7.5%. Increase in activities in sectors such as manufacturing, mining and services were cited as the main drivers behind the growth in the quarter. Moreover, economic policies including rate cuts by the Reserve Bank of India (RBI) along with several measures taken by the Indian government are likely to boost the economy in the months ahead. Meanwhile, positive net FDI flows in the reserve of RBI and a significant decline in fiscal deficit also had a positive impact on the economy. It was reported that India’s fiscal deficit gradually declined from 7.6% of GDP in 2009 to currently 4%. Also, the continuing slump in prices of oil, which is one of the major imported commodities in India, had a significant effect on the Indian economy over the past one year. While the plunge in crude helped the trade deficit to remain at a controllable level, decline in prices of oil and other major commodities also restrained the inflation rate to go beyond the targeted range. The World Bank said, “In contrast to other major developing countries, growth in India remained robust, buoyed by strong investor sentiment and the positive effect on real incomes of the recent fall in oil prices.” 3 India ETFs to Buy Given the bullishness, we have highlighted three India ETFs with a Zacks ETF Rank #2 (Buy) that may prove to be profitable for investors who are interested to gain from the positive outlook of the Indian economy. Market Vectors India Small-Cap ETF (NYSEARCA: SCIF ) This fund targets the small cap segment and tracks the Market Vectors India Small-Cap Index. In total, it holds 143 securities in its basket with none making up for more than 3.27% of assets. Financials occupies the top position from a sector look at 27.7% while industrials, consumer discretionary, and information technology round off the next three spots. The fund has so far amassed $173.2 million in its asset base while charging 89 bps in annual fees. Volume is good, exchanging around 94,000 shares in hand a day. The ETF lost 0.3% over the past one-month period. EGShares India Infrastructure ETF (NYSEARCA: INXX ) This ETF provides exposure to 30 Indian stocks by tracking the Indxx India Infrastructure Index. It is pretty well spread out across components with none of the securities holding more than 5.06% of assets. With respect to sector holdings, construction & materials takes the top spot at 18.3%, followed by mobile telecommunications (14.7%), electricity (14.3%) and industrial engineering (10.2%). The product has managed assets worth $40.8 million and trades in volume of nearly 26,000 million shares a day. It has an expense ratio of 0.93% and lost 0.3% over the past one month. PowerShares India ETF (NYSEARCA: PIN ) This fund offers exposure to a basket of 50 stocks selected from the universe of the largest companies listed on two major Indian exchanges by tracking Indus India. The top two firms are Reliance Industries and Infosys (NYSE: INFY ). From a sector look, the fund is tilted towards energy and information technology, each accounting for around 20% share, followed by financials (11.5%) and healthcare (11%). The fund has amassed $430.3 million in its asset base and trades in solid volume of around 1.2 million shares a day on average. It charges an expense ratio of 85 bps and lost 0.4% in the past one month. Original Post

U.S. Turns Hotbed Of Hiring: ETFs And Stocks To Surge

The U.S. labor market has been on a hiring spree, outperforming other economies across the globe. The economy added 292,000 jobs in December to add up to 2.65 million jobs for all of 2015. This represented the second consecutive year of strong job growth since 1999. Moreover, the unemployment rate held steady at a seven-year low of 5% for the third consecutive month. While wage growth remained tepid in December with average hourly wages declining by a penny to $25.24, it increased 2.5% for 2015, marking the best year for wage gains since the Great Recession. This shows that wage growth is definitely gaining momentum. The robust data shows that the U.S. is one of the healthiest economies in the world that has been able to withstand global uncertainty stemming from the China turmoil, a relentless slide in oil price and a strong dollar. Further, it has spread optimism into the economy, which is now likely to be able to handle another rate hike, though the Fed is unlikely to raise rates before March. Market Impact Following the upbeat job data, the U.S. stocks initially moved higher, halting a two-day rout that has wiped out $4 trillion from global equities this year. But the renewed slide in crude prices reversed overall gains, pushing the stocks in deep red at the close. Investors could take advantage of the beaten down prices and buy stocks and ETFs that are the largest beneficiaries of job gains. Below, we have highlighted some of the funds that will likely see smooth trading in the days ahead. ETFs to Consider PowerShares DB US Dollar Bullish Fund (NYSEARCA: UUP ) A healing job market and the resultant improving economy will pull in more capital into the country and lead to an 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 US Dollar Index Futures Index Excess Return plus the interest income from the fund’s holdings of the U.S. Treasury securities. In terms of holdings, UUP allocates nearly 57.6% in euro while 25.5% collectively in the Japanese yen and British pound. The fund has so far managed an asset base of $1.1 billion while sees an average daily volume of around 1.9 million shares. It charges 80 bps in total fees and expenses, and added 0.2% on the day following the jobs report. The fund has a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook. SPDR S&P Homebuilders ETF (NYSEARCA: XHB ) Solid labor market fundamentals along with affordable mortgage rates will continue to fuel growth in the recovering homebuilding sector, creating a buying opportunity in homebuilders and housing-related stocks. In addition, the slower and gradual rates hike will not impede the growth prospect of the sector, at least in the short term. The most popular choice in the homebuilding space, XHB follows the S&P Homebuilders Select Industry Index. In total, the fund holds about 37 securities in its basket with none accounting for more than 4.71% share. The product focuses on mid-cap securities with 65% share, followed by 25% in small caps. The fund has amassed about $1.5 billion in its asset base and trades in heavy volume of more than 3.5 million shares. Expense ratio comes in at 0.35%. XHB lost 1.7% on the day and has a Zacks ETF Rank of 2 or ‘Buy’ rating with a High risk outlook. SPDR S&P Retail ETF (NYSEARCA: XRT ) Retail will also benefit from accelerating job growth and a moderate rise in wages that will increase the consumer spending power. XRT tracks the S&P Retail Select Industry Index, holding 101 securities in its basket. It is widely spread across each component as none of these holds more than 1.33% of total assets. Small-cap stocks dominate more than three-fifths of the portfolio while the rest have been split between the other two market cap levels. XRT is the most popular and actively traded ETF in the retail space with AUM of about $616.6 million and average daily volume of around 4.2 million shares. It charges 35 bps in annual fees and shed 3% on the day. The product has a Zacks ETF Rank of 1 or ‘Strong Buy’ rating with a Medium risk outlook. Stocks to Consider Though several sectors will benefit from healthy hiring, the direct beneficiary is the staffing industry. The industry bodes well at least in the near term given the superb Zacks Industry Rank (in the top 10%) at the time of writing. Investors seeking to ride out the optimism could look at a few top-ranked stocks having a Zacks Rank #1 (Strong Buy) or #2 (Buy) with a Growth Style Score of B or better using our Zacks Stock Screener. Cross Country Healthcare, Inc. (NASDAQ: CCRN ) Based in Boca Raton, Florida, Cross Country is a leading healthcare staffing services’ company which primarily focuses on providing nurse and allied, and physician staffing services and workforce solutions. The stock is expected to deliver earnings growth of 26.9% for fiscal 2016 versus the industry average growth of 25.5%. The stock lost 0.9% in Friday’s trading session and currently has a Zacks Rank #1 with a Growth Style Score of ‘A’. Heidrick & Struggles International, Inc. (NASDAQ: HSII ) Based in Chicago, Illinois Heidrick & Struggles International is one of the leading global executive search firms. With years of experience in fulfilling clients’ leadership needs, it offers and conducts executive search services in every major business center in the world. The stock is expected to post earnings at a growth rate of 19.2% annually in fiscal 2016, which is higher than the industry average of 17.4%. HSII gained 0.3% on the day and has a Zacks Rank #1 with a Growth Style Score of ‘A’. Tarena International, Inc. (NASDAQ: TEDU ) Based in Beijing, the People’s Republic of China, Tarena International is a leading provider of professional education services in China with core strength in information technology professional education services including classroom training. Tarena has an incredible earnings growth projection of 69.8% for fiscal 2016 compared to the industry average of 17.4%. The stock was up 0.4% in the Friday session and has a Zacks Rank #2 with a Growth Style Score of ‘B’. Original Post

Portfolio Rebalancing – A Potentially Golden Opportunity

For a variety of reasons, gold is a widely-held asset class within investment portfolios. Many investors include gold in their asset allocation mix for its perceived ability to act as both a diversifier and as a potential store of value in times of uncertainty; these perceptions contribute to the concept of gold as a “core holding” in many diversified portfolios. Indeed, with the notable exception of Warren Buffett , 1 some of the investment community’s most distinguished names currently maintain investments in gold. 2 Like any investment, gold is subject to rebalancing or reallocation when its value relative to other portfolio components shifts significantly. Examining quarterly data from the beginning of 1976 (the year that gold started trading freely in the United States) through the quarter ended December 31, 2015, suggests that gold is overvalued relative to historical price relationships with the major agricultural crops of corn, wheat, soybeans and sugar. 3 In fact, at quarter-end December 31, 2015, the gold/corn ratio, defined herein as the number of bushels of corn an investor could buy with the proceeds from selling one troy ounce of gold, was 296 bushels versus a 39-year average value of 169 bushels. Gold investors attempting to maximize portfolio performance through disciplined quarterly or annual rebalancing may want to consider adjusting their gold holdings in tandem with their existing or anticipated agricultural sector portfolio investment mix. For example, the historical data for the gold/corn ratio suggests that a mean reversion 4 from December 31, 2015, levels of 296 bushels to the 39-year mean value of approximately 169 bushels of corn for each ounce of gold (bu/oz) could benefit an investor rebalancing gold for corn within their portfolio. Click to enlarge As illustrated in the chart above, at 296 bu/oz, the gold/corn ratio is approximately 75% above its nearly four decade average of 169 bu/oz. Hypothetically, if an investor sold gold and purchased corn at the current 296 bu/oz level, and the ratio subsequently retraced to its historical mean value of approximately 169 bu/oz, the investor would then be able to sell the corn and buy back 75% more gold than was originally sold to make the temporary reallocation from gold into corn. While the gold/corn ratio was historically above its 39-year mean at the end of Q4 2015, other major agricultural crops were also very near all-time historic highs for the same time period. Charts for the gold/wheat, gold/soybean, and gold/sugar ratios are shown below. The gold/wheat ratio was 80% above its 39-year mean value, the gold/soybean ratio was 77% above, and the gold/sugar ratio was nearly 47% above its historical 39-year mean average value. Click to enlarge Click to enlarge Click to enlarge The current availability of both futures contracts and futures-based exchange traded products for gold, corn, wheat, soybeans, and sugar makes rebalancing the gold and agricultural components within a portfolio easier than ever before. Investors and advisors need to make an assessment of the relative value of gold versus their other portfolio constituents, including agriculture, and appropriately adjust their allocations to suit their individual investment needs and objectives. 1 ” Why Warren Buffett Hates Gold .” NASDAQ 15 Aug. 2013: Web. October 9th, 2014. 2 Based on the 13-F filings for holders of the SPDR Gold Trust (NYSEARCA: GLD ) as of 12/31/15, and found using Bloomberg Professional, January 4th, 2016. 3 Analysis & corresponding charts were prepared by Teucrium Trading, LLC, using Bloomberg Professional, January 4th, 2016. All supporting detail available upon request 4 Mean Reversion : A theory suggesting that prices and returns eventually move back towards the mean or average. This mean or average can be the historical average of the price or return or another relevant average such as the growth in the economy or the average return of an industry. Additional disclosure: I have held in the near past, and may purchase in the near future, shares of DGZ as a proxy for short gold against my long agricultural holdings of corn, wheat, soybeans and sugar.