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What’s Behind The Recent Rally Of SLV?

Summary The silver market heated up in recent weeks. What’s behind the recent rally in the price of SLV? A weaker U.S. dollar and falling long-term yields are part of the story behind the latest recovery in the silver market. The silver market has heated in recent weeks, which has also pushed up the price of the iShares Silver Trust ETF (NYSEARCA: SLV ). What’s behind the recent rally of SLV? Let’s examine what is keeping up the price of SLV, and what does it mean up ahead for the silver market? Is it just because of the weaker U.S. dollar? It’s hard to consider the rally in the price of SLV without taking into account the recent depreciation of the U.S. dollar. The chart below presents the traded weighted U.S. dollar index (normalized to 100 for the end of March) and the price of SLV over the past several months: (click to enlarge) Source: FRED and Google Finance As you can see, the U.S. dollar lost some ground since the beginning of the month after several U.S. economic reports came below expectations including the NFP report, retail sales, and JOLTS. And since the core CPI came a bit higher than expected – the annual rate reached 1.9% – the market has become even more suspicious as to whether the FOMC will actually move forward and raise rates anytime soon, let alone this year. But the chart above also shows that while the depreciation of the U.S. dollar may have slightly contributed to the rally of the SLV, it still did fall by much to explain such a spike in SLV’s price. It’s worth noticing, however, that this week’s ECB monetary policy could have an impact on the foreign exchange markets including the euro/USD. And if the ECB were to convey a dovish sentiment that may include plans to expand or extend the current QE program, this news could actually pull back up the U.S. dollar – something that could curb down the recent rise in SLV and perhaps even bring it back down. If we also look at the recent changes in the long-term treasury yields relative to SLV, we could see that haven’t plummeted and only slowly came down in the past few weeks, which could have also helped boost up precious metals prices. (click to enlarge) Source of data: Bloomberg and U.S. Department of the Treasury Based on the CME Group 30-Day Fed Fund futures prices, the market has lowered the implied probabilities for the Fed to raise rates in December to only 30% and for March 2016 to 52% – only a month ago, the odds were close to 50% for a December hike. The drop in probabilities, mainly due to weaker-than-expected economic data – mostly in the labor market – has provided backwind to the silver market. And although from the fundamentals point of view, the market continues to slowly tighten, there haven’t been enough new developments to warrant such a rise in the price of SLV. Bottom Line The last time the price of SLV rose so fast in a single month was back in January of this year. Back then, long-term yields also dropped and the U.S. dollar fell against major currencies. And the Swiss National Bank decided to end the pegging of the Swiss franc to the euro. These events boosted volatility and helped pull up SLV. This time around, we also see falling U.S. dollar and lower LT yields, and volatility may have subsided in recent weeks, it could still erupt as there are growing concerns over the progress of China and even the U.S. This current climate could change and drag back down SLV especially if other central banks (ECB and BOJ) continue to move forward and devalue their respective currencies and the Fed pull its rate hike. But as long as these central banks don’t move forward – the Fed by raising rates, and ECB and BOJ in expanding their QE programs – the price of SLV is likely to continue to remain its current level. For more please see: Is SLV about to change course?

4 ETFs For Income In Q4

The volatile end to Q3 and flow of soft economic data in the U.S. since then has once again highlighted the importance of income-focused investing. Be it bonds, high dividend equities, or pass-through securities, picks that address higher yielding securities are performing well in the final quarter of year. The Fed lift-off worry which has been a pain in the neck for stocks so far this year has now shifted back to the early 2016, at the earliest. Back-to-back shockers at home including a soft job report, muted manufacturing numbers, subdued inflation and now an eight-month low retail sales in September on top of a revised down sales figure in August marred the optimism surrounding the U.S. growth momentum. To top it all, global growth worries stemming from hard landing fears in China, return of deflationary threats in the Euro zone, a slowdown in Japan and a faltering emerging market that was hit by the commodity market crash persuaded the Fed to stay put. Investors should note that not only the Fed, a half of the globe, specially the developed part is presently pursuing an easy money policy. While it is a decent setting for capital gains, 10-Year Treasury bond yields slumped and are at 1.99% as of October 14, 2015 leading some to believe that a glorious phase for high yielding securities may be near. While the likelihood of more cheap money inflows should cheer up stocks and especially dividend investing all over again, the momentum lost in the U.S. economy also raises questions over how long the Fed-induced optimism can support a stock market rally. So, high-yield dividend investing is needed to ward off capital losses, if there is any in the near future. Moreover, investors can target bond ETFs as income picks. This is truer given the flight to safety amid heightened volatility in the global market. Broader commodities are also helping this trend, with stubbornly-low oil prices putting a cap over inflation. In this type of an environment, investors can count on income picks for Q4. While an individual security pick is always an option, ETFs give options to fairly diversify one’s portfolio. Below, we highlight four intriguing selections which could be just what the doctor prescribed. These options offer up a nice combination of potential capital appreciation and strong yields. In fact, most of the choices have yields in excess of 5%, making them excellent income choices: Global X Super Dividend (NYSEARCA: SDIV ) SDIV represents a compelling product to invest in international markets for high yield. SDIV is an equally weighted basket of 114 high yield stocks from around the world. With 30% exposure in U.S. equities, the fund also provides access to securities in Europe, Australia, Asia, Canada and Latin America. Among sector allocations, real estate, financial services, utilities and telecommunication remain the top four choices for the fund. The fund charges a fee of 58 basis points annually. Furthermore, not only is the product well-mixed from a sector look, it is also well-diversified from an individual holding perspective as no single firm makes up more than 1.89% of assets. The fund yields about 6.91% annually, representing a good opportunity for investors to generate some income by investing overseas. This Zacks ETF Rank #3 (Hold) was up 2.4% in the last one month (as of October 14, 2015). Arrow Dow Jones Global Yield ETF (NYSEARCA: GYLD ) For investors who want exposure to a variety of high yielding market areas, ArrowShares’ GYLD could be an excellent choice. This fund tracks the Dow Jones Global Composite Yield Index, giving access to five key market areas; global equities, global real estate, global sovereign debt, global alternatives and global corporate debt. The fund puts more-or-less 20% in each of the five sectors with no single security taking more than 0.99% in the fund. This ensures that the product is well diversified among 150 total holdings. The fund pays a 12-month Yield of 8.71% (as of October 14, 2015). Over the last one month, the fund was up over 2.2%. The fund’s multi-asset approach and a global footprint should offer decent capital appreciation going forward. High Yield Long/Short ETF (NASDAQ: HYLS ) The fund seeks to provide current income by investing primarily in a diversified portfolio of below investment-grade or unrated high-yield debt securities. Capital appreciation is its secondary motive as evident from the 1.8% loss incurred in the last one month. The 296-holding product thrives on long-short strategies and can be effective in times of market upheaval. Net weighted average effective duration (considering the short positions) is 3.07 years indicating low interest rate risks. The fund is meant for an intermediate term as evident from 6.08 years of weighted average maturity. It yields 6.68% annually. Vanguard Extended Duration Treasury ETF (NYSEARCA: EDV ) For a long-term play on the bond market, investors have EDV, a fund that seeks to match the performance of the Barclays U.S. Treasury STRIPS 20-30 Year Equal Par Bond Index. This means that this benchmark zeroes in on fixed income securities that are sold at a discount to face value, and then the investor is paid the face value upon maturity. This is a safer choice with decent current income opportunities. The fund has been a great performer lately, having returned over 5.8% (as of October 14, 2015) on its safe haven appeal. This particular 73 bond basket has an average maturity of 25.1 years, and a yield to maturity of 3%. The fund may yield lesser than other options, but it is still higher than the benchmark yield and is also likely to shower smart gains on investors in the present market condition. The effective duration of the ETF is 24.7 years suggesting high interest rate risks. This Zacks Rank #2 (Buy) ETF has amassed about $371 million in assets. It charges just 12 basis points a year. Original Post

QQQ Is Far More Than A Technology-Driven Juggernaut

Summary The truth is that many technology companies have historically picked the NASDAQ exchange as their home base. However, when you dig beneath the surface, this unique group of stocks actually offers far more than just a one-dimensional focus. Over the years, QQQ has evolved to include a broader depth of sector dispersion as market dynamics, M&A activity, and other growing trends have taken hold. The PowerShares QQQ Trust ETF (NASDAQ: QQQ ) is based on the NASDAQ-100 Index, which measures the 100 largest non-financial stocks currently trading on the NASDAQ exchange. Whether by design or practical experience, this index and its affiliated ETF have always been associated with the technology sector. The truth is that many technology companies have historically picked the NASDAQ exchange as their home base. Because QQQ culls its underlying holdings from this pool, there is a natural tendency to be overweight the cream of the crop in the technology field. However, when you dig beneath the surface, this unique group of stocks actually offers far more than just a one-dimensional focus. Over the years, QQQ has evolved to include a broader depth of sector dispersion as market dynamics, M&A activity, and other growing trends have taken hold. Understanding its nuances can unveil attractive characteristics for investors looking to capitalize on a diversified array of top growth stocks . Today’s QQQ The current sector makeup of QQQ is 55% technology, 20% consumer discretionary, 14% healthcare, 7% consumer staples, and a small fraction in industrials. Top holdings in this ETF include: Apple, Inc. (NASDAQ: AAPL ), Microsoft Corp. (NASDAQ: MSFT ), and Amazon.com, Inc. (NASDAQ: AMZN ). Together, these three stocks make up over 25% of the total portfolio, with AAPL garnering 12.65% of the overall weight. Fun fact: According to Wikipedia , AAPL is one of only four original components of the NASDAQ-100 Index since its debut in 1985. The other three are Costco Wholesale Corp. (NASDAQ: COST ), Intel Corp. (NASDAQ: INTC ), and PACCAR, Inc. (NASDAQ: PCAR ). Many of the top stocks in QQQ can be found in specialized sector funds such as the Technology Select Sector SPDR ETF (NYSEARCA: XLK ). However, the real value in this index is its diversification into other realms such as biotechnology, social media, e-commerce, and other consumer-driven themes. Healthcare in particular has been a strong momentum area of the market over the last several years and continues to be a performance differentiator for QQQ. In addition, the underlying holdings in this ETF are not solely U.S.-based stocks. Many publicly-traded international companies such as Baidu, Inc. (NASDAQ: BIDU ) and JD.com, Inc. (NASDAQ: JD ) are represented in the index as well. This broader diversification has prompted QQQ to become one of the top baskets that market experts monitor on a daily basis. To date, this juggernaut has accumulated $39 billion in total assets and charges an expense ratio of 0.20%. While the QQQ expense ratio is slightly higher than an equivalent S&P 500 Index fund, the embedded cost is still in a reasonable realm for a market-cap weighted ETF. How To Use This ETF An ETF like QQQ has many uses within the context of a diversified portfolio . It straddles the line between a low-cost core index fund and a more nuanced tactical position, which makes it a versatile fund for a variety of investor profiles. More aggressive investors with a long-term mindset may be apt to view this ETF as a core holding from which they can own top companies across a variety of growth-oriented themes. This should come with the implicit understanding that QQQ will likely experience periods of heightened volatility versus ETFs that have greater emphasis on defensive areas of the market. On the flip side, this fund can also be used by active investors to tactically overweight a smaller portion of their portfolio towards high momentum stocks. This may include taking advantage of a short-term trading opportunity or simply finding value in the sectors that make up this unique index. Whatever your reason may be for owning this ETF, it should be noted that the underlying holdings are evaluated on an annual basis to stay in line with the index methodology. Stocks that have shrunk in market cap size may be eliminated and others will ultimately take their place. In addition, automatic rebalancing will impact the distribution of assets among the individual stocks in the portfolio. My advice is to thoroughly research these factors and create a sound game plan before implementing this ETF in your own account.