Tag Archives: stocks

Market Lab Report – Premarket Pulse 1/15/16

Major averages rose on higher volume as the much awaited bounce materialized. That said, a number of defensive names showed institutional accumulation, an unhealthy sign. There were a number of breakouts among utilities, an area of the market that can hardly be considered the stuff of dynamic leadership. The downtrend remains intact as the market continues to trace out a major top with the Russell 2000 in bear market territory. It is also an ill omen that the market has twice corrected more than 10% in such a short span of time with a rally of at least 10% in between the two 10%+ corrections. Such occurrences are very rare and came before major bear markets in 1929, 2000, and 2008. The pattern also occurred in late 1998 right before one of the largest bull market rallies in history. That said, assuming the Fed does not launch QE4, the odds dictate a nasty growling bear is long overdue at some point this year. Furthermore, the huge rally that began after the pattern occurred in late 1998 was supported by many leading stocks of the day, all of which were sporting healthy patterns. Today’s leaders are very few and even the best of them look pale by comparison to the leaders of late 1998. Network solutions company EQIX had a pocket pivot off its 50-day moving average. It resisted the last two 10%+ corrections in the NASDAQ Composite and is one of the first stocks to take an early lead toward new highs. Of course, we are still in a market where buying on weakness is a better strategy. FB, one of the “FANG” stocks also had a pocket pivot. It bounced hard off its 200dma. Because of this straight up from the bottom pattern, it may very well pull back again allowed for a better entry point. Earnings and sales are accelerating, pretax margin 57.1%, institutional sponsorship has increased in every quarter since the company went public, group rank 14. The market is still volatile, so the wait-and-see approach instead of buying anything right now may be a better strategy as we advised in yesterday’s PPR report. The market bounce so far is lacking the upward thrust of prior bounces. Indeed, futures are lower by about 2.5% more than wiping out yesterday’s gains. Oil has fallen below $30 and China’s Shanghai Composite Index fell another 3.55% overnight. Further, the Empire State factory index declined sharply in January, well below expectations, to its lowest level since the last recession that ended in 2009.

How Sustainable Is The Nikkei Rebound? Japan ETFs In Focus

Japan’s key index, the Nikkei, ended in the positive territory for the first time this year on Wednesday. The Nikkei gained 2.9%, or 496.67 points, on Wednesday, after losing nearly 1,800 points from the start of this year through Tuesday. Despite hitting the highest year-end close last year in 18 years, the benchmark was struggling to finish in the green from the start of this year following China-led global growth worries and the oil price slump. Reasons Behind the Rebound Better-than-expected trade data out of China, gains in the U.S. markets and decline in the yen’s value against major currencies emerged as the main reasons behind the rebound. The General Administration of Customs reported that Chinese exports declined 1.4% in December, narrower than a 6.8% drop in November and the markets’ estimate of an 8% decline. Though imports declined for the 14th consecutive month in December, the 7.6% drop in imports compared favorably with November’s plunge of 8.7% and the markets’ forecast of an 11.5% decline. Meanwhile, modest gains in the U.S. markets on Tuesday also boosted the Nikkei. A late rebound in Healthcare and Technology stocks helped the benchmarks to offset a further decline in oil prices. Also, the weaker yen helped the major exporters, including large-cap auto companies and tech companies, to attract investors, as it raised the possibility of an increase in export volumes. Will It Sustain? The sustainability of this rebound in the near term will largely depend on some key factors, including the condition of the Chinese economy, the movement of crude and the health of the Japanese economy. Though better-than-expected Chinese trade data boosted the markets on Wednesday, the decline in both exports and imports indicate that both global and domestic demand continued to remain weak. Meanwhile, the World Bank recently 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%. The bank also predicted that the economy may grow at a slower pace of 6.5% over the next two years. Separately, given the weak outlook for the Chinese economy, which is one of the leading importers of oil, and an already oversupplied market, there is little hope of a recovery in oil prices. Crude is currently trading at a 12-year low, with every indication of a slide below $30 per barrel. In this scenario, the Japanese economic environment will play a key role in setting the course of the Nikkei in the coming months. Japan opted for several economic stimulus measures last year, which proved to be more effective than the steps taken by China and the eurozone. The economy rebounded strongly in the third quarter to register a GDP growth rate of 1%, as against the second quarter’s contraction of 0.5%. Meanwhile, the impact of recent modifications in the quantitative easing program by the Bank of Japan (BOJ) will also remain in focus. The bank opted for raising the Japanese government bonds’ (JGBs) average maturity from 7-10 years to 7-12 years, and announced that it will allocate 300 billion yen of assets annually in purchasing ETFs that seek to follow the JPX-Nikkei Index 400. Japan ETFs in Focus In this scenario, popular Japan ETFs and funds that closely track the performance of the Nikkei will remain on investors’ radar in the coming months. The Precidian MAXIS Nikkei 225 Index ETF (NYSEARCA: NKY ), which tracks the performance of the Nikkei 225 Index, returned nearly 9.4% last year. Meanwhile, the performance of other popular Japan ETFs will also remain in focus in the near term. In 2015, the iShares MSCI Japan ETF (NYSEARCA: EWJ ), the WisdomTree Japan Hedged Equity ETF (NYSEARCA: DXJ ) and the Deutsche X-trackers MSCI Japan Hedged Equity ETF (NYSEARCA: DBJP ) returned 8.9%, 3.3% and 4.5%, respectively. Original Post

Why Invest In Dividend Aristocrat ETFs Now?

There is hardly a market scenario where dividend investing fails to soothe jittery investors’ nerves. Though many thought that the bull market for dividend investing will end with the start of the Fed policy tightening and the resultant rise in bond yields, in reality, the popularity of dividend investing has shot up in recent times. This was because of the sharp rise in global growth issues, which is why equity markets are running a high risk of volatility and bond yields remained in check despite the Fed liftoff. The demand for safe havens and value investing has lit up. Investors hungry for yields are running to high-yielding options in the quest for regular current income, which can make up for capital losses. Agreed, benchmark yield-beating options will be in focus given the ongoing Fed policy tightening. But in the present volatile market, dividend aristocrats – which are more stable, mature and profitable companies consistently raising dividends or going for high payouts – may serve up investors’ objective more efficiently. Why Dividend Aristocrats Are Superior Bets Now? These dividend aristocrat companies are generally apt for value investing. Since volatility is expected to pull the string ahead, what could be a better option than superior dividend investing for capital appreciation and some smart yields? In a market crash, these dividend aristocrats stand out and even navigate through volatility. As per the latest study carried out by Reality Shares, companies that initiated or hiked their dividends have beaten those that kept their dividends same, paid no dividend at all, or cut or scrapped dividends in the 1999-2015 time frame. This can be corroborated by the gains during the above-mentioned period, as dividend initiators and growers earned 5.4% return, the highest among the dividend players. All dividend payers took the second spot with 4.29% gains, followed by 1.92% gains enjoyed by dividend distributors with the same dividends. However, no-dividend payers or dividend cutters and scrappers recorded losses of 0.8% and 5.99% respectively, as per the document. Below, we highlight four dividend aristocrat ETFs which may give a relatively stable performance in the coming months amid further Fed rate hike bets, developed market woes and China’s hard-landing fears, and the occasional global market rout. Vanguard Dividend Appreciation ETF (NYSEARCA: VIG ) VIG follows the Dividend Achievers Select Index, which is composed of common stocks of high-quality companies that have a record of increasing dividends for at least 10 years. The $18.2 billion fund is currently home to 179 securities. The ETF is heavy on Industrials (22.4%) and Consumer Goods (21.6%). With an expense ratio of 0.10%, this is one of the cheapest funds in this space. It yields 2.46% annually, and was down 6.7% in the last one year (as of January 11, 2016). VIG has a Zacks ETF Rank #2 (Buy). SPDR Dividend ETF (NYSEARCA: SDY ) This fund provides exposure to the 101 U.S. stocks that have been consistently increasing their dividend every year for at least 25 years. It follows the S&P High Yield Dividend Aristocrats Index, and has amassed $12 billion in AUM. Volume is solid, exchanging more than 765,000 shares in hand, while the expense ratio comes in at 0.35%. The product is widely diversified across components, as each security accounts for less than 2.46% of total assets. Financials is the top sector, taking up one-fourth of the portfolio, while Industrials (14.7%), Consumer Staples (13.9%), and Utilities (12%) round off the next three spots. The fund was down nearly 10.4% in the last one year (as of January 11, 2016). SDY yields 2.80% and has a Zacks ETF Rank of 3 (Hold). Schwab U.S. Dividend Equity ETF (NYSEARCA: SCHD ) This $2.9 billion fund tracks the Dow Jones U.S. Dividend 100 Index, which measures the performance of high dividend-yielding U.S. stocks that have a record of consistently paying dividends. The 106-stock fund charges a meager 7 bps in fees. Consumer Staples is the fund’s focus sector with about 23% exposure, followed by IT (19.3%). SCHD yields 3.13% annually (as of January 11, 2016) and lost 7.1% in the last one year. It also has a Zacks ETF Rank #3. WisdomTree U.S. Dividend Growth ETF (NASDAQ: DGRW ) This fund tracks the WisdomTree U.S. Dividend Growth Index and offers diversified exposure to U.S. dividend-paying stocks with both growth and quality characteristics. It has gathered $594.5 million in its asset base. The ETF charges 28 bps in fees per year from investors. DGRW holds 300 securities in its basket, with each holding less than 4.16% share. From a sector look, it provides double-digit allocation to Consumer Discretionary (20.11%), IT (19.48%), Industrials (19.23%), Consumer Staples (18.59%) and Healthcare (14.95%). The fund has shed 6.1% in the year-to-date time frame and has a Zacks ETF Rank of 3. Original Post