After sinking early in the week, equity markets finished on a high note with the Dow closing just below 11,000. Commodities have been in focus in recent trading, as oil sank for the week while gold soared as Greece’s credit rating was lowered to BBB-. In other news, Treasury Secretary Timothy Geithner visited Beijing in order to help cool relations between the two superpowers and nudge China towards letting its currency appreciate against the dollar.
And it was another active week in the ETF industry; a handful of new funds began trading, including small cap sector ETFs from PowerShares and leveraged and inverse biotech ETFs from ProShares. Below, we offer our best picks for the week’s top stories in the world of ETFs:
Five Essential Tips for Analyzing ETFs at ETF Database:
When comparing potential ETF options, some investors don’t know where to begin. Highlighted in this article are five critical criteria an investor should consider before purchasing an ETF. We highlight both quantitative and descriptive metrics that can provide insight into the risk/return profile, and direct investors to the best resources for attaining this data.
High Courts Fund-Fees Ruling Opens New Door at Index Universe:
The Supreme Court has recently been called upon to help remedy a five year old case between investment advisers and mutual fund companies regarding excessive fees. Supreme Court Justice Samuel Alito delivered a ruling which sent the case back down to lower courts and gave justices the right to learn why investment advisers typically charge mutual fund companies more for their services than they do big individual clients, such as pension funds. That possibility for extra judicial scrutiny never existed before, and marks a new way for shareholders to be heard, according to some legal scholars. Now that the Judicial Review will have discretion to look in on investment advisers’ business practices, some believe it could mark the beginning of a long, tumultuous dispute that could go on for years.
Portfolio Building Blocks: Biotech at Seeking Alpha:
Now that Obama has signed the health care reform bill into law, Carol Flake Chapman feels it is time to consider investing in a sector that will reap the benefits of near-universal health care: biotechnology. Chapman believes the sector will flourish in the coming years since many of their products will retain ‘data exclusivity’ rights for 12 years instead of a proposed five. Such a ruling could be a boon for the industry allowing firms to keep their drugs on patent for longer and thus reap more profits. The two ETFs that have performed well as of late and could show the most promise are First Trust NYSE/ArcaBiotech (FBT) and iShares Nasdaq Biotech Index (IBB), which “hit a new 52-week high on the day after health care reform was passed.” Chapman is looking for both of these funds, as well as the general biotech sector, to be in focus as the demand for many drugs soars due to widespread health insurance coverage.
The Good News on Retail Sales May Not be So Good at ETF Guide:
Although retail sales are predicted to show an increase of 8-10% for March, there are a few seasonal factors which may explain these soaring figures. Contributing to these big returns were the mild weather in March preceded by a dismal February, and the long Easter Holiday. Nonetheless, a few retail ETFs have reached new pinnacles, including RTH, XRT, and PMR, and are trading at 2 year highs. Daryl Montgomery states that ”liquidity is responsible for this ongoing rally”, and we should be weary of overpriced securities in the retail sector.” While a good thing only lasts so long, there may be some severe repercussions when the dust settles for this struggling industry.
Disclosure: No positions at time of writing