Tag Archives: european

Best Ways To Invest In Gold Now – Metal Or Miners ETFs?

Gold appears to be one of the hottest trades this year. The precious metal has gained almost 16% this year-making it the best start to the year since 1980 . The rush to gold and other safe havens is a direct result of concerns about the global economy, including China slowdown, oil price plunge and earnings recession in the US. Growing worries that central banks may be running out of ammunition are also aiding gold’s ascent. Further, negative interest rates in Japan and some European countries are also boosting gold prices. Gold critics often argue that it is an unproductive asset since it pays nothing to holders and that argument does make some sense when interest rates are high but in the current ultra-low/negative interest rate environment, there is almost no opportunity cost of holding the metal. Then there are supply factors too. According to a report from the World Gold Council, Gold production declined during Q4 last year – its first quarterly drop since 2008 and they expect this trend to continue as mining firms have cut investments after years of losses. And demand is China and India has been rising. While Indians have been buying jewelry, Chinese have increased their purchases of gold coins and bullion as the country’s currency and stocks continue to weaken. Physically Backed Gold ETFs Physically backed gold ETFs – SPDR Gold Trust (NYSEARCA: GLD ) and iShares Gold Trust (NYSEARCA: IAU ) provide a convenient and cost-effective access to physical gold. ETF Name Ticker AUM Expense Ratio YTD Return SPDR Gold Trust GLD $28.3 bil 0.40% 16.6% iShares Gold Trust IAU $7.2 bil 0.25% 16.8% While IAU has a lower fee, GLD’s excellent trading volumes make its trading very cheap. So, IAU is more suitable for buy and hold investors while GLD is better for shorter-term traders . Gold Miners ETFs Gold miners are leveraged plays on the metal. Miners’ profits rise even with a small increase in the price of the metal. Market Vectors Gold Miners ETFs (NYSEARCA: GDX ) and Market Vectors Junior Gold Miners ETF (NYSEARCA: GDXJ ) are the two most popular ETFs in the space. These ETFs-which are high risk/high reward plays–have been outstanding performers this year. However, in addition to their volatility, investors should also remember these ETFs have a lot of international exposure and associated currency risks. ETF Name Ticker AUM Expense Ratio YTD Return Market Vectors Gold Miners ETF GDX $5.71 bil 0.53% 37.8% Market Vectors Junior Gold Miners ETF GDXJ $1.6 bil 0.55% 32.9% To learn more please watch the short video below: Original post

ECB To Further Stimulate Economy: 5 Euro Mutual Funds To Buy

The Eurozone economy is trying hard to crawl back to its pre-crisis peak. It is currently grappling with issues like a slower growth rate, slump in bank stocks as well as a refugee crisis. Europe was subject to a continuous inflow of refugees from war-torn nations like Syria, Afghanistan and Iraq. In addition, global headwinds such as the sluggish growth rate in China and a continuous slump in oil prices are causing a lot of heartburn for the region. The European Central Bank (ECB) introduced reform measures to boost its fragile economy, which fell short of expectations. Nevertheless, the ECB President Mario Draghi’s assurance at the European Parliament that more stimulus measures are on the way boosted investor sentiment. He believes that the Eurozone economy is on a firmer ground than what it seems. He also sounded pretty confident about the state of the beleaguered banking sector. As for the refugee crisis, most of the economists believe that it won’t have a large economic impact as it is more of a political issue. In fact, ageing nations such as Germany’s manpower will stand to improve. In order to cash in on these positives, investors may look toward investing in Europe-focused mutual funds. These funds not only delivered positive returns during the period of crisis, but are also poised to perform well on the back of an improving economy. Lackluster Growth, Bank Stocks Take a Hit The 19-country Eurozone expanded at an annual rate of 1.1% in the final quarter of 2015, less than what it was at the onset of the 2008 global economic crisis. Greece falling back into recession and Italy’s economy remaining stagnant were some of the major reasons that pulled back the broader economic growth in the Euro region. The ECB responded to the crisis by trimming a key interest rate to negative 0.3% in December and extending its bond-buying program of 60 billion euro a month until March 2017. These measures were taken to boost the ailing Eurozone economy and achieve the desired inflation rate of less than 2%. However, these steps were not enough to impress investors as they were anticipating deeper rate cuts and additional asset purchases. The inflation rate in the single-currency area stood at 0.4% in January, way below the level expected. Meanwhile, banks’ stocks in Europe took a beating. The Stoxx Europe 600 Banks Index that covers 47 regional companies engaged in the banking sector tanked more than 20% year to date. Ultra-low interest rates are hampering the profits that banks make from loans. The spread between long-term rates at which banks lend and short-term rates at which banks borrow has shrunk considerably. A Confident Draghi Given the wild swings in banks’ shares, Draghi reassured investors about the health of the banking sector. Draghi emphasized that even though low-interest rates adversely affected banks, the monetary stimulus measures employed since the financial crisis have increased the resilience level of the broader financial system. He said that Eurozone banks have boosted their financial strength by increasing core tier one capital ratios from 9% to 13%. The banks are also in a “good position” to handle bad loans. He added that “the ECB’s supervisory arm is working closely with the relevant national authorities to ensure that [their] non-performing-loan policies are complemented by the necessary national measures.” Moreover, Draghi said that “[they] will not hesitate to act” to stimulate the Eurozone economy and push the inflation rate to its desired level. He pledged to revive the economy by “reviewing and possibly reconsidering the monetary policy stance in early March.” He has already fought back to improve sentiments by keeping interest rates unchanged in January. After hearing from Mario Draghi, economist Howard Archer of IHS Global Insight said that the ECB may cut the interest rate from a negative 0.3% to a negative 0.4% in March. The ECB might also increase its asset purchases by 20 billion euro to 30 billion euro from the current level. If this comes about, stocks are certainly expected to move north. 5 Euro-Focused Mutual Funds to Buy Given the optimism exuded by Draghi, investors might have a look at funds exposed to the Eurozone. Our analysis is based on selecting funds that have overcome bottlenecks by posting commendable returns. Further, fueled by solid fundamentals, these funds are also poised to perform well in the near term. These funds have positive 3-year and 5-year annualized returns, carry a low expense ratio, have minimum initial investment within $5000 and possess a Zacks Mutual Fund Rank #1 (Strong Buy) or #2 (Buy). When it comes to the refugee crisis, however, it will be prudent to keep an eye on the region to arrive at informed decisions. Fidelity Europe (MUTF: FIEUX ) seeks growth of capital over the long term. FIEUX invests a large portion of assets in securities of European issuers and other investments that are tied economically to Europe. This fund’s 3-year and 5-year annualized returns are 1.6% and 1.4%, respectively. Annual expense ratio of 1.01% is lower than the category average of 1.47%. FIEUX has a Zacks Mutual Fund Rank #1. Invesco European Growth A (MUTF: AEDAX ) seeks long-term growth of capital. AEDAX invests a major portion of its assets in securities of European issuers and in derivative instruments that have economic characteristics similar to such securities. This fund’s 3-year and 5-year annualized returns are 2.1% and 4.5%, respectively. Annual expense ratio of 1.37% is lower than the category average of 1.47%. AEDAX has a Zacks Mutual Fund Rank #2. T. Rowe Price European Stock (MUTF: PRESX ) seeks long-term growth of capital. PRESX invests the majority of its assets in European companies. This fund’s 3-year and 5-year annualized returns are 3.1% and 4.2%, respectively. Annual expense ratio of 0.95% is lower than the category average of 1.47%. PRESX has a Zacks Mutual Fund Rank #2. JPMorgan Intrepid European A (MUTF: VEUAX ) seeks total return from long-term capital growth. VEUAX invests primarily in equity securities issued by companies with principal business activities in Western Europe. This fund’s 3-year and 5-year annualized returns are 2.4% and 2.9%, respectively. Annual expense ratio of 1.41% is lower than the category average of 1.47%. VEUAX has a Zacks Mutual Fund Rank #2. Fidelity Nordic (MUTF: FNORX ) seeks long-term growth of capital. FNORX invests a large portion of assets in securities of Danish, Finnish, Norwegian and Swedish issuers and other investments that are tied economically to the Nordic region. This fund’s 3-year and 5-year annualized returns are 10.5% and 7.5%, respectively. Annual expense ratio of 0.99% is lower than the category average of 1.86%. FNORX has a Zacks Mutual Fund Rank #1. Original Post

What Negative Interest Rates Tell You About The Risk-Reward Backdrop

When a country’s central bank reduces its interests rates below zero (i.e., “goes negative”), the action should boost the relative appeal of stock assets. That is the theory. Unfortunately, recent policy initiatives by the European Central Bank (ECB ) and the Bank of Japan (BOJ) have failed to inspire their respective stock markets. The ECB first began fooling around with negative interest rate policy in June of 2014 by lowering its overnight deposit rate to -0.1.% It went to -0.2% in September of 2014; it went even lower (-0.3%) by December of 2015. Did these rate manipulating endeavors benefit European equities or hurt them? The EuroStoxx 600 Index moved lower shortly after each of the interventions and it currently trades at a lower value since the inception of negative rates. Meanwhile, the Bank of Japan (BOJ) became the second major player to announce plans to charge financial institutions (-0.1%) for the privilege of depositing money. Since the announcement on January 29, 2016, the Nikkei 225 has shed 7.5% of its value. The price depreciation even includes a monster 7% snap-back rally – a price surge that came on speculation that the BOJ will enact more “stimulus” due to persistent recessionary pressures. Naturally, front-loading an enormous rally in stock and real estate prices to create a wealth effect is not the sole aim of a country’s central bank. Academic policy leaders believe that sub-zero rate policy strengthens a region’s or nation’s export competitiveness by weakening a corresponding currency. Take a peek at the falling euro via the CurrencyShares Euro Trust ETF (NYSEARCA: FXE ) since June of 2014. On the flip side, European exporters haven’t exactly been lighting the world on fire since its currency cratered. Trade volumes have been largely flat. Whatever exporting advantage might have been reaped from a a weaker euro-dollar was nullified by anemic demand around the globe. It seems there is more to winning the global trade game than engaging in currency wars. And there’s more. Sometimes, a country’s best laid plans go awry. The yen via the CurrencyShares Japanese Yen Trust ETF (NYSEARCA: FXY ) has actually gained 5.5%-plus since the BOJ lowered its target rate to -0.1%. The hope that additional depreciation in the yen would boost export competitiveness – absent more successful efforts to depreciate the currency – may backfire. If negative interest rates are unable to create a wealth effect and have an uncertain track record with respect to boosting export competitiveness, why do it at all? Hope. Zero percent rate policy coupled with quantitative easing (QE) in the United States succeeded at creating a wealth effect and depreciating the U.S. dollar up until the Federal Reserve began tapering QE stimulus in 2014. The hope around the world had been that the Fed’s gradual stimulus removal in the U.S. since 2014 would allow zero percent rates to work better in Europe and Japan. It didn’t. And with few other tools at the disposal of foreign central banks, “going negative” became the illogical conclusion. Is it possible that negative rates in Europe and/or Japan will eventually work? Either to boost respective economies abroad or foreign asset prices for stateside investors? Anything’s possible. However, it has been more beneficial to sell into international equity strength. Consider the iShares MSCI All-World Ex U.S. Index ETF (NASDAQ: ACWI ). Buying the dips of the previous bear market rallies proved damaging. Of course, the central bank of the United States has not resorted to negative interest rates… yet. On the contrary. The Federal Reserve has gradually removed stimulus over the last few years. It ended its final rate manipulating bond purchase (QE) in December of 2014; it raised overnight lending rates 0.25% in December of 2015. Whereas the ECB in Europe and the BOJ in Japan may not be able to revive risk appetite through monetary policy alone, the U.S Fed can. Interest rate gamesmanship fostered the 10/02-10/07 stock bull; it front-loaded the stock rally for the 3/09-5/15 bull market. Nevertheless, until the Federal Reserve reverses course by opting for zero percent rates with a 4th round of quantitative easing, bear market rallies will continue to deceive those who hide their heads in the sand. If you are already prepared for the S&P 500 to fall 20%, 25% or 30% from its May high – if the S&P 500 SPDR Trust (NYSEARCA: SPY ) falling to 170, 160 or 150 does not faze you – then you would not need to make changes to your portfolio. On the flip side, investors who recognize that the risk-reward backdrop for U.S. equities remains unseasonable may wish to reduce their overall U.S. stock exposure. Selling into a bear market rally can help one raise the cash desired to weather the series of tornadoes yet to come; it also gives one the confidence to increase stock exposure at more attractive prices. Consider a cash level of 25% to 35%. For Gary’s latest podcast, click here . Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. 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