This Week In ETFs: July 1st Edition

by on July 1, 2012 | ETFs Mentioned:

After a week full of both economic and political happenings, stocks rallied in their second-largest jump of the year. These gains can be directly attributed to efforts that took place at the two-day euro zone summit, which surprisingly produced what many interpreted to be a couple of steps in the right direction. The end-of-the-week summit was largely seen as a success as leaders agreed that a single supervisor for the euro zone’s banks was necessary.

On the data front, the news was less encouraging; as most analysts expected, consumer spending was unchanged in May. The Supreme Court’s ruling over Obamacare pushed hospital stocks up while insurance stocks fell Thursday morning. Though the market had an end-of-the-month surge, recovery is still slow and has led some analysts to voice opinions that the economy is in no better shape than it was one year ago. 

The product development front has slowed as this week saw the launch of one new ETF: SDOG.

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

1. Don’t Let Europe Distract You from the Bargains in Emerging Markets at Money and Markets:

Headlines are often appealing to amateur investors looking to find trends in the market. In order to stay ahead of the curve, investors must look past headlines and instead focus on the horizon. As countries around the world try to stimulate their economies, this article points out a few ways to potentially ride the next bull trend. Tom Essaye outlines three emerging markets ETFs that he thinks could be a good pick in the wake of policy easing.

2. With ETFs, Sometimes the Price Is Wrong at SmartMoney:

Though ETFs are created to accurately reflect the values of all underlying assets, it’s a fact that ETFs often trade at either discounts or premiums to their true value. This disconnect exists because of factors affecting the assets held within the ETF. Ian Salisbury reviews the “three things” that cause the price of ETFs to stray from their underlying value.

While the author here makes some good points, it should be noted that ETFs are generally very efficient at tracking the value of the underlying assets. And in many cases when a delta appears, an argument can be made that the ETFs are actually acting filling a “price discovery” role for illiquid underlying assets. 

3. Five ETF Surprises From The First Half at ETF Database:

As the first half of 2012 is now behind us, ETFdb highlights some of the surprise performers and under-performers from the last six months. Michael Johnston describes five ETFs and details what makes their performance surprising in his view. From gold’s disappointing first half to some unexpected standouts in European stock and bond markets, this article highlights a handful of ETFs with first half performances that were not quite what investors might have expected. 

Disclosure: No positions at time of writing.