Special Report: The Best Fidelity Fund to Buy Before 2015

SPECIAL REPORT: The Best Fidelity Fund to Buy Before 2015 With the risk of higher interest rates becoming reality in 2015, investors looking for high income face a tough set […]

ETF Watchlist for December 31, 2014

SPDR Energy (XLE)
United States Natural Gas (UNG)
First Trust ISE Revere Natural Gas (FCG)

The decline in oil prices slowed last week, but West Texas Intermediate Crude is again sliding to new lows in Wednesday trading.

Equity investors saw a buying opportunity in December and bid shares up off their lows, but will they keep buying if oil prices continue falling? Equity investors are forward looking, so a bounce in equity shares is likely to come before oil prices bottom out. We have a potential bottom here, but not a conclusive one.

Natural gas has been weaker than expected because December was warmer than expected. The drop in oil prices also rattled the natural gas market. Similar to XLE though, FCG has bounced even as natural gas moved lower. Natural gas’ one major strength is that it is priced locally. Natural gas can and will deviate from oil if demand rises in the United States, but it will take far lower temperatures this winter for that happen.

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PowerShares U.S. Dollar Index Bullish Fund (UUP)
WisdomTree Dreyfus Emerging Currency (CEW)
Global X Greece (GREK)
CurrencyShares Euro Trust (FXE)
WisdomTree Dreyfus Chinese Yuan (CYB)

Greece’s ruling party failed to elect a president, so new elections are coming at the end of January. This throws the euro back into potential crisis since the party leading in the polls, Syriza, wants to scrap parts of the bailout agreements and end austerity. The euro is also slumping in part because traders believe a European QE policy is more likely with oil prices falling, since it will lead to deflation in the eurozone. The euro is at new lows for the year, but it is holding around its lows of the past 5 years. The next year will bring a big rally in the euro or a collapse to new lows, with the current political situation arguing for new lows. The Economist has a solid roundup here: The euro’s next crisis.

CEW bounced recently, helped by the big bounce in the Russian ruble, but over this period the Chinese yuan weakened. If the yuan continues to weaken, it will pull emerging market currencies lower with it, but for now, oil is still the bigger story.

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iShares Nasdaq Biotechnology (IBB)
SPDR Biotech (XBI)

Biotechnology was hit by a slide in shares of Gilead (GILD) a week ago. A competitor had its hepatitis drug approved by the FDA and it also signed a deal with Express Scripts (ESRX) to sell the drug at a discount, potentially delivering a blow to Gilead. However, not all biotech ETFs were harmed by the news. IBB, which is a market cap weighted ETF, was hit hard by the news because GILD is a top ten holding. XBI, which is an equal weight index, has only 1 percent exposure to GILD and took a much smaller hit.

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iShares Russell 2000 (IWM)
SPDR S&P Midcap 400 (MDY)

The small cap Russell 2000 finally climbed to a new all-time high last week. Small cap shares  previously peaked in March and then failed to follow the large cap indexes to new highs. Prior to the breakout in small caps, the mid cap indexes moved to new highs. Weakness in small and mid caps had raised a caution flag on the bull market, since it could be an early sign of a top in the market, but the push higher puts the market back on a firmly bullish footing as we head into 2015.

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KBWY: Small-Cap REIT ETF Has Attractive Yield

KBWY: Small-Cap REIT ETF Has Attractive Yield

A Seeking Alpha Contribution

Summary

  • FRI offers similar exposure to VNQ, but at five times the cost.
  • Small-cap KBWY delivers a full percentage point more in yield.
  • KBWY has outperformed large-cap REITs when interest rates increased in the past.

There are two more ETFs to cover on the domestic side. The first is the First Trust S&P REIT Index ETF (NYSEARCA:FRI). This one of the smaller REIT ETFs on the market, but has amassed nearly $300 million since inception in 2007.

Index & Strategy

FRI tracks the S&P United States REIT Index. The index covers U.S. REIT shares, including some specialty REITs such as prisons, but holds no timber REITs. Due to criteria that the companies own properties, the index also excludes mortgage REITs. The holdings are weighted by market cap. The holdings and the weightings in FRI are most similar to those of the Vanguard REIT Index ETF (NYSEARCA:VNQ), which tracks the MSCI US REIT Index.

*Please note, this article was written and published as a contribution for Seeking Alpha. To finish reading the article you will be redirected to their site…. To Continue Reading Please, Click Here.

Market Perspective for December 29, 2014

The Russell 2000 Index will try to finish 2014 at a new all-time high following nearly a year of sideways trading. The small cap index peaked in spring 2014 but was unable to find support allowing it to follow the rally in large-caps. A push in the final days of 2014 is possible given mid-caps climbed to a new 52-week high last week. While mid-cap stocks had under-performed in 2014, they have turned higher and started closing the gap with large-caps. If they don’t turn up this week, we will likely see small-caps play catch up in early 2015.

Domestic stocks have the wind at their back following last week’s revision of GDP up to 5.0 percent growth. A rise in healthcare spending driven by the Affordable Care Act led to the surprise number, which was well above even the optimistic 4 percent growth forecasts. Although the boost in healthcare spending is good news for the sector, it may fail to be the best performing sector this year, hurt by last week’s dip in biotechnology. Instead, utilities are on track to be the best performing sector to close the year. The S&P 500 utilities sector is up 27.90 percent this year, ahead of the 24.71 percent return for the healthcare sector.

Aside from strong economic growth reported last week, American stocks and bonds may benefit from turmoil in Europe after Greece’s ruling party failed to elect a new president. A general election will be held at the end of January following the third round of presidential voting, in which New Democracy leader Antonis Samaras failed to secure the 180 votes needed for victory. The latest polls show the anti-austerity Syriza party with a 6 percent lead on New Democracy. This weekend, Germany’s finance minister warned Greece that it will be expected to adhere to international agreements, no matter who wins. In the past, Syriza leader Alexis Tsipras has said he would abandon austerity.

The immediate result of the failed presidential vote was a more than 10 percent drop in Greek equities, though losses were curtailed by the end of the trading day. Greek bond yields jumped while yields on northern European sovereign debt sank as investors moved to safety. The two-year German bond yield fell to negative 10 percent and the 10 year yield dipped to 0.56 percent. It remains to be seen if this is a trend or an overreaction by investors, but the shift in European assets is positive for the U.S. dollar and assets prices this week.

Global markets will be closed on Thursday for New Year’s Day. Some countries also have a holiday on Wednesday or Friday. December purchasing managers’ indexes will be out on Friday. Few companies will report earnings during this holiday shortened week.

Euro Faces Political Test Next Week

Euro Faces Political Test Next Week

A Seeking Alpha Contribution

Summary

  • The euro is at a technical crossroads: the charts favor a bounce, but events lean bearish.
  • Greece’s ruling party appears to be losing the presidential vote.
  • The Greek vote could influence ECB policy and upcoming elections in the UK and Finland.

Greece is back in the headlines. The ruling party has called a snap election for president, but if the party fails to elect its candidate, it will trigger parliamentary elections at the end of January that could hand power to the anti-austerity opposition.

Political Crisis

The Greek debt crisis is an economic crisis, but it is also a political crisis. After five years, the Greece debt crisis is unresolved because there is no broad consensus between the political leadership in Europe and the voters of Europe on how to deal with the debt problem. Within Greece, there is a disagreement over austerity. In the wider European Union, a similar split exists. Many voters, such as those in Germany, oppose bailouts for Greece, while European leadership has mostly favored them…. To Continue Reading Please, Click Here.

*Please note, this article was written and published as a contribution for Seeking Alpha. To finish reading the article you will be redirected to their site.