This holiday-shortened week was full of surprises as incoming economic data gave investors plenty to speculate about. The week started off with modest gains in anticipation of Thursday’s European Central Bank meeting, at which the decision of interest rate changes was to be announced. The Commerce Department reported an increase in orders for manufactured goods and the price of gold rose as investors continued to hope for a third round of monetary easing. Following the nation’s Independence Day, markets continued to stagnate as the European Central bank lowered its interest rate by 25 basis points, while China’s central bank announced their second interest rate cut in less than a month. News from abroad continued, as England announced the addition of $78 billion in funds to bolster their bond-buying program.
Thursday’s positive news of a drop in weekly jobless claims and an addition of 176,000 jobs by private employers did little to boost investor confidence. This Friday’s announcement of US Non-farm Payrolls painted a bleak picture for the US recovery. Though our economy is undoubtedly in a soft patch, analysts speculate that Friday’s news alone won’t be enough to spur a third round of quantitative easing by the Federal Reserve. Though poor jobs numbers caused a jump in volatility, overall the markets sustained no major damage as the closing bell rang Friday afternoon.
The product development front was slow to start this month as this past week saw no new ETF launches.
Below we outline the three best stories from around ETF space this past week:
1. States Give ETFs the Old College Try at SmartMoney:
College-savings plans have recently been scrutinized for less than expected returns and over-exposure to volatile markets. Parents may now see a change in 529 plans –state-sponsored tax-advantaged accounts for college savers– as certain states are turning to ETFs for diversification and protection from swings in the stock market. The author, Annamaria Andriotis, reveals why some states are choosing to make long-overdue changes to the structures of various college savings plans. If anything, this article validates the effectiveness of ETFs over mutual funds in certain situations.
2. Inside Natural Gas and UNG’s Wild Q2 at Commodity HQ:
As the first half of the year came to a close, it was obvious that one commodity had quite the wild ride: natural gas. The United States Natural Gas Fund LP (UNG) had quite the surprising quarter as it was able to post positive returns following a 1-to-4 reverse stock split in February. Jared Cummans reviews these gains and reveals how one of the worst performing ETFs of all time was able to make positive strides this past week.
3. Africa ETFs: Cure For The Common Portfolio? at ETF Database:
When asked to identify prominent emerging markets, most investors would undoubtedly list China, India, or even South America, but what most investors fail to recognize is the hotbed of industry sitting within Africa. As population increases within the giant continent, it will be interesting to see if economic growth factors can keep pace with the rapid expansion. Michael Johnston covers a couple of the ETFs offering exposure to Africa and explains why the current ETFs aren’t positioned to take full advantage of the coming growth.
Disclosure: No positions at time of writing.
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