The strength of broad domestic stock market indices in 2017 has been the dominating story in global financial markets. The expectation of new government policies, coupled with the lack of risk asset volatility, has many investors feeling confident in a continuation of the bullish trend.
As of last week, ETFs trading in the United States have accumulated over $75 billion in fresh capital inflows since the start of the year. The majority of that money has gone towards stock-focused index funds such as the SPDR S&P 500 ETF (SPY).
As we near the mid-point of 2016, I examine some of the top ETFs for YTD fund flows. Many of these names are obvious defensive plays and may signal some short-term exhaustion in price. Observations of risk and reward are noted throughout. Charts include: large cap stocks, international stocks, low volatility stocks, bonds, gold, and more. Recorded on June 22, 2016.
This article is the first in a series co-authored by David Fabian (fmdcapital.com) and Aaron Jackson (jacksonstocks.com). Each week we will be unlocking the secrets to some of the most talked-about exchange-traded funds in the market. The goal is to better understand what you own or elevate new ideas to the forefront of your watch list.
Many investors have been caught off guard this year with the sharp drop in stocks combined with a rush to safety in traditional defensive asset classes. This week we will be reviewing a trio of diversified ETFs designed to hold stocks with lower historical price fluctuations than traditional market-cap weighted benchmarks. These tools can be useful for more conservative investors that are seeking to maintain an allocation to stocks with the goal of mitigating downside risk. Read more
The turmoil that has gripped the stock market is one that some experts predict will last for many months to come. The swinging pendulum of greed and fear is now firmly pegged on the latter sentiment and many investors are now turning to a strategy of capital preservation rather than swinging for the fences.
Not surprisingly, this most recent dip in stocks has created a surge in traditional defensive plays such as precious metals, Treasury bonds, and utility stocks. These asset classes display either an inverse relationship with interest rates or the reassuring embrace of a physical asset with intrinsic monetary qualities. The allure of an oversized cash or money market position is another defensive strategy that can create a temporary feeling of relief from the swirling uncertainty in stocks.
The first half of 2015 was a disappointment for exchange-traded funds that track utility stocks. These ETFs were broadly sold as investors banked profits from solid performance in 2014 and worried about the implications a rising rate environment. The threat of a Federal Reserve rate hike coupled with an overshoot to the upside in intermediate-term U.S. Treasury bond yields created a headwind for this defensive sector.