This year’s Inside ETFs Conference proved to be an exciting and equally insightful event as some of the best minds in the industry met under one roof alongside Wall Street professionals of all walks.
The ETF conference spurred countless discussions and debates around the biggest developments that are shaping the industry itself. Likewise, issuers, advisors, and portfolio managers were also sharing ideas about the biggest trends that are likely to shape the investment landscape going forward. Below, we’ve compiled a list of the five most talked about investment trends for 2015 and the ETF categories to utilize for playing them.
5. Dividend Growth Trumps Yield
Generating a meaningful current income stream was a hot topic at this year’s conference amid a persistently low-rate environment around the globe. With that in mind, many experts fervently communicated that dividend-focused strategies will remain in the spotlight even after hogging the headlines all of last year.
There’s over 80 Dividend ETFs on the market, although we’d advise considering those products focused on dividend-growth more so than high yield. The reason behind this is simple: dividend-growth strategies should outperform those based solely around high-yield securities as we enter a rising rate environment at home.
4. Frontier Markets Gain Traction
Investors have grown more and more comfortable with diversifying into overseas markets over the years. While many still retain a home-country bias, there’s a growing demand for exposure to foreign equity markets as the aging U.S. bull market slows down. One of the big topics this year was the importance of distinguishing between emerging and frontier markets, and how the latter offers a tremendous opportunity for growth to those with a stomach for risk and a long-term horizon in mind.
If you’re looking to take a broad-based approach to accessing Frontier Markets, there are only three options at the moment. However, you can also go down the country-specific route, and focus on areas like Africa and the Middle East.
3. Currency Volatility Will Linger
Throughout 2014 we witnessed the incredible ascent of the U.S. dollar and the first month of 2015 opened the doors to rampant volatility in the currency market. In short, many experts are confident that volatility in the currency market will linger, if not intensify, in the New Year. As the Fed gears up to raise rates at home, most other major central banks are still very much in easing mode.
Luckily, the ETF universe spans far and wide and U.S. investors now have a handful of choices when it comes to protecting against currency fluctuations – if you’re eager to invest overseas, but prefer to maintain your exposure in U.S. dollar terms, consider the extensive lineup of Currency-Hedged ETFs currently available.
2. Take Advantage of Liquid Alts
The U.S. equity market has experienced a rough start to 2015 and many are anticipating that choppy conditions will persist as price appreciation clashes with valuations amid a sluggish global economy. With that in mind, many are turning to liquid alternatives as a means to generate uncorrelated sources of return and to help dampen their portfolio’s risk profile. A few years ago, turning to alternatives would have been completely out of the question for retail investors, but now investors have dozens of choices in the form of exchange-traded vehicles.
Consider any of the Alternative ETFs as a means to put your cash to work without over-exposing yourself to equities in case of a severe downturn on Wall Street.
1. U.S. Economy Leads the Way
The most talked about investment trend for 2015 was hands down the fact that the U.S. economy would continue to lead the way on the global stage. The main reasons why countless experts felt sure that this trend would hold true is due to a strengthening labor market matched with a low-rate environment that is likely to continue fueling growth in capital expenditures and rising consumer spending.
The corners of the domestic market that are deemed to be best positioned to beat the broad market in 2015 are:
It’s worth noting that suppressed energy prices are also expected to serve as a tailwind for many of the industries highlighted above.
The Bottom Line
ETFs have opened up the doors to countless asset classes that were previously out-of-reach for most. This in turn has allowed investors of all walks to now be able to take advantage of investment trends across borders and corners of the market they would not have been able to access in an easy and cost-efficient manner just a few short years ago. Be sure to keep an eye on the trends highlighted above as they look to take root in 2015.
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