5 ETF Plays For BlackRock’s 2013 Outlook

by on January 10, 2013 | ETFs Mentioned:

The new year has been quite kind to equity markets, however, savvy investors have been reluctant to get too comfortable, given the largely uncertain global economic outlook. With 2012 in the history books, it’s that time of year again to peer into the future and devise strategies suited for the unpredictable road ahead. Financial behemoth BlackRock (BLK), also the parent of iShares ETPs, has laid out its 2013 outlook, citing several major themes that appear poised to have an impact on the investment landscape in the year ahead [see also Favorite ETF Positions For 5 Super Investors].

Last year was largely dominated by ultra-loose monetary policies from central banks around the globe, which begs the question — will 2013 be any different? In BlackRock’s 2013 Investment Outlook, the experts note that potential changes in ongoing stimulus measures are set to serve as major catalysts in shaping the economic landscape going forward [see also 13 Rapid Fire ETF Ideas For 2013].

Among the major themes highlighted in the report are:

  • Low expectations around the globe are setting the stage for lots of potential upside surprises.
  • A positive resolution to the “fiscal cliff” should bolster the U.S. economy and help global growth.
  • If “loose money” policies start to wind down, traditionally “safe haven” assets could see strenuous headwinds.
  • The hunt for meaningful yield will continue, however, investors will likely focus on the higher-quality options.
Below we highlight five ETFs that resonate with BlackRock’s 2013 outlook and may offer investors some guidance when it comes to formulating their own strategy for the new year:

1. FactorShares 2x S&P 500 Bull/T-Bond Bear (FSE)

With the Fed already hinting at pulling the plug on their bond-repurchase program, tightening monetary policy in 2013 is certainly on investors’ radar. As such, low yielding debt, namely Treasuries, boast a growing risk profile in the new year especially if sentiment improves and prompts further flows into equity markets. FSE allows investors to take a bearish stance on Treasuries without going all in; as long as the S&P 500 Index outperforms U.S. Treasuries, this ETF should turn in a nice profit [see also Monthly Dividend ETFdb Portfolio].

2. United States Agriculture Index Fund (USAG)

China’s appetite is expected to continue growing as favorable demographic trends further bolster consumption and urbanization. BlackRock, however, also points out the volatility in the agricultural commodity space, which makes USAG a great fit for anyone looking to capitalize on this trend. This fund consists of 14 agricultural futures contracts, and each commodity is weighted based on market liquidity and overall economic importance [see Commodity Guru ETFdb Portfolio].

3. iShares JP Morgan Emerging Markets Bond Fund (EMB)

In the world of fixed income, BlackRock’s outlook highlights the attractiveness of emerging market debt; furthermore, the report also outlines a bullish future for the U.S. dollar. As such, EMB is a viable vehicle for anyone looking to tap into this segment of the market, especially considering that its underlying holdings are U.S. dollar denominated [see King Dollar ETFdb Portfolio].

4. EG Shares Dow Jones Emerging Markets Consumer Titans Index Fund (ECON)

On the equity front, the report highlights the importance of domestic consumption plays, namely across the largest emerging markets like Brazil and China. ECON allows investors to tap into a portfolio of leading emerging market companies that are favorably positioned to take advantage of robust local consumption trends fueled by rising levels of discretionary income. From a geographic perspective, this ETF is weighted most heavily towards companies from Latin America and Asia, although African stocks also account for a significant chunk of the portfolio [see ETFs For The World's Most Valuable Emerging Markets Brands].

5. WisdomTree Japan Hedged Equity Fund (DXJ)

One of BlackRock’s biggest contrarian ideas for 2013 is buying into Japanese exporters while simultaneously selling the Japanese yen; the thesis here being that Japanese exporters can take advantage of the economic rebound across developed and emerging markets alike while any monetary easing efforts employed by the Bank of Japan are sure to create further headwinds for the yen in the currency market. DXJ fits this contrarian idea perfectly as it offers long exposure to Japan’s equity market while at same time hedging exposure to fluctuations between the U.S. dollar and the yen; this results in performance attributable solely to equity prices without the effect of currency fluctuations.

Follow me on Twitter @SBojinov

[For more ETF analysis, make sure to sign up for our free ETF newsletter or try a free seven day trial to ETFdb Pro]

Disclosure: No positions at time of writing