This Week In ETFs: August 5th Edition

by on August 5, 2012

With Europe continuing to sit in a state of paralysis, U.S. investors started the week off pessimistically with markets experiencing a four-day losing streak. In a dramatic leap, stocks surged ahead Friday afternoon following U.S. payrolls data, which rose more than expected in July. Though the Dow jumped to a three-month high, investors should be weary that at least a portion of Friday’s growth could be attributed to investors covering their bearish bets. The Euro is slowly gaining some ground as European leaders are working feverishly to come up with a concrete solution to their debt crisis. Though the U.S. added some 163,000 jobs during the month of July, unemployment continued to tick upwards. This sure sign of our economy’s weakness has left investors speculating as to whether or not the U.S. Federal Reserve will step in with additional measures in an attempt to fuel our stagnant economy [see also 7 Simple & Cheap ETF Model Portfolio].

The ETF industry had slow week on the product development front. Seeing as this week transitions from July to August, issuers seem to be holding off on new releases [see also The One Chart Every Commodity Trader Must See].

Below we outline the three best stories from around the ETF space this past week:

1. Knight’s Troubles = ETF Trading Woes at IndexUniverse:

Knight Capital continues to tread lightly in the face of collapse; the company lost over $440 million in less than an hour resulting from a software glitch in their trading system. The “bug” not only wiped out most of Knight Capital’s assets, but also sent out a shockwave felt by the entire banking industry. Unsurprisingly, ETF investors were not untouched by the disaster as Knight Capital acts as the lead market maker for many low-liquidity ETFs. The author, Dave Nadig, discusses the problems with low-liquidity ETFs and how they can be affected by as little as one company’s folly.

 2. How to manage volatility as the fiscal cliff looms at MarketWatch:

As the final month of Summer quickly melts away, investors stand in the shadow of what could possibly be a wave of volatility. Investor concerns include topics such as the upcoming election, reaching the government debt ceiling, and the looming “fiscal cliff” supposedly waiting for us in 2013. Accordingly, investors must “winterize” their portfolios to avoid excessive exposure to probable risk in the markets. Wallace Witkowski outlines a few useful strategies you can use to ensure that your portfolio ready for even the harshest of winters.

 3. 3 Reasons Why Mexico Is The New Brazil at ETF Database:

With debt drama plaguing the developed countries of the world, investors have strayed to look for the next profitable emerging market. When told to name an emerging market in South America, most investors would be quick to yell Brazil. While Brazil has experienced unparalleled growth, many investors have failed to see the tremendous opportunity offered by Brazil’s northerly rival: Mexico. In the article, Stoyan Bojinov reviews the three overarching reasons that Mexico is on track to be the lucrative choice when investing in South America.

Disclosure: No positions at time of writing.