In this month’s video, I look at the overall trends in global stock markets with particular emphasis on the U.S. dollar impact. Chart review includes analysis of U.S. stocks, international stocks, interest rates, oil prices, and volatility. Observations of risk and reward are noted throughout, with an emphasis on trend following and sensible portfolio management strategies. Recorded on July 26, 2017.
In the financial world, the price of crude oil is tracked almost as closely as the day-to-day fluctuations of the S&P 500 Index. This liquid commodity is essential to so much of the global economy that investors are continually try to forecast its direction and what it entails for other investment classes.
Investing directly in the oil markets used to be the realm of big-money traders with access to the futures markets. However, the introduction and wide spread adoption of exchange-traded funds (ETFs) that track these contracts has made the ability to invest in oil more mainstream.
Picking the right exchange-traded fund for your investment portfolio can be an arduous task that is often compounded by the sheer number of available offerings. In some sections of the ETF marketplace, there can be 10, 15, or even 20 competing funds that offer just slightly different variations on the same theme.
This is especially true in the commodity space through its wide variety of single-sector and diversified indexes. Many investors will default to the ETF with the longest history, lowest expenses, or largest assets under management. However, that strategy doesn’t always result in the best overall returns and can often lead to surprises in tax treatment or other unforeseen risks.
Everyone hated energy ETFs last year as plunging oil and natural gas prices eroded valuations of companies engaged in this sector. The weakening demand for global commodities wrought havoc among large oil producers, exploration companies, and even storage conglomerates. Read more
The concept of value investing is one that has proven its worth over decades of cyclical investment trends. Most often, investors who adhere to this practice are trying to uncover stocks or areas of the globe that are fundamentally mispriced in relation to more expensive alternatives. Buying at a low relative valuation, with a long-term time horizon, can provide fruitful results as mature trends fade and fresh momentum takes shape.
One stunning example of this valuation gap can be seen in the divergence between emerging market stocks and those here in the United States. The iShares MSCI Emerging Market ETF (EEM) has $26 billion dedicated to an index of 842 publicly traded companies in China, South Korea, Taiwan, India, Brazil and many others.