In what turned out to be a pretty volatile week, the S&P 500 finished Friday roughly where it started the five day period, hovering around the 1,270 mark. Investors continued to focus in on the Greek crisis and concerns over the health of the American economy stayed in the picture as well after Fed Chair Ben Bernanke gave a gloomier outlook for the rest of the year. Commodity markets also experienced a very interesting period; most products tumbled thanks to a stronger dollar, while oil was slaughtered on Thursday thanks to an IEA-led release of 60 million barrels of crude, pushing WTI closer to the $90/bbl. level. The ETF world continued to grow despite concerns over the global economy as 12 new products were launched this week including a suite of emerging market sector funds and four actively-managed products from AdvisorShares.
Below, we outline three of the best ETF stories from around the web this past week:
Biotech ETFs: Which One Is Best Now? at Morningstar:
The biotech sector is one corner of the market where ETFs are especially important to investors; single companies can surge or tumble by double digits in a single session with great regularity, highlighting the importance of diversification. While there are a number of products that target this key sector, there are stark differences between the five potential choices. This article, written by Robert Goldsborough, highlights the key aspects of each fund that investors need to be aware of and how these nuances can greatly impact bottom line returns. Robert even gives his recommendations as to which he thinks are the best choices for both the risk-tolerant and risk-adverse investors.
Bank of Japan’s Risky Business In ETFs at MarketWatch:
Since the Japanese economy still remains extremely weak, the Bank of Japan has resorted to some unconventional tactics in order to keep equities afloat as of late. Highlighted in this article is what is known as the “1% rule” in the country, a process in which the BoJ buys exchange-traded funds whenever the Topix index of all issues on the first section of the Tokyo Exchange ends a morning session down at least 1%. Since April, when stocks triggered this one percent rule they returned into the positives close to two-thirds of the time compared to just 41% when the BoJ did not intervene. While this may be having an impact on the markets, some believe it is just psychological as the amounts that are being purchased are not enough to move the markets in most analysts’ opinions. Nevertheless, the story is an interesting read for those who are curious as to how a central bank buying ETFs can potentially impact the broader markets.
Inverse VIX ETNs: Reviewing All The Options at ETF Database:
Although investors have seen a spike in volatility as of late, many investors have still seen losses in VIX-based ETPs thanks to the devastating impact of contango. This process means that long-dated futures are more expensive than those closer to expiration, forcing funds that must roll their products into the next month to pay far higher prices for similar contracts. Thanks to this structural problem in the VIX market, a number of issuers have debuted funds that target the flipside of this phenomenon; inverse VIX ETNs. In this article, Michael Johnston outlines the many options that investors have in this intriguing space, discussing the nuances that traders must be familiar with before picking a product for their portfolio.
Disclosure: long XIV.