The analysts here at ETF Database analyzed the search patterns of visitors to our site during the past week. Below, you’ll find our analysis of the top five trends. By analyzing these trends, we hope to unlock a better understanding of the investment themes trending on our site and in the market.
Our Alternative Energy Equities ETFs page kept trending this week, with an increase in traffic of 78%. Another major trend, relating to alternative energy, was the Solar Energy ETF page, which saw increased traffic of 4.5% this week. As mentioned in the previous Trends article, renewable energy is becoming the preferred choice for electricity generation.
Perhaps the main reason why this page is trending even higher this week is that the United Nations Framework Convention on Climate Change (UNFCCC) 21st Conference of the Parties (COP21) started this past Monday, November 30. The conference is very important since it’s a meeting during which real change in renewable and alternative energy will be discussed. As a result, alternative energy ETFs are expected to rally if the meeting concludes with ambitious country goals for reducing their carbon footprint. The way to implement such change is for the government to provide more incentives for alternative energy companies.
The Global Alternative Energy ETF Market Vectors (GEX ) is one of the most popular ETFs to play the alternative and renewable energy trend.
A noteworthy event in the energy sector this week was the EPA wanting to increase the supply of ethanol going into 2016, which was more than the proposed EPA figure in May 2015. Ethanol is an alternative fuel source made from corn, algae and other plants.
The Currency ETF page saw increased traffic this week of 28%. There were several macro events that increased investor interest in these currency investments. The first was the announcement by the U.S Federal Reserve that it might raise rates later this month following its two-day meeting in mid-December. If the Fed pulls the trigger, emerging-market currencies will increase or decrease in value depending on their country’s growth. EM currencies are currently trading lower due to the overall market consensus of a rate hike.
On Thursday, market participants who were investing for a diverging monetary policy in the U.S. and Europe were surprised when the ECB announced that it will keep its asset purchases unchanged. The extra yield on U.S Treasuries over German bonds caused the U.S. dollar to fall against the euro.
The European Equities ETF page was also trending, with an increase in traffic of 26%. The main reason was the drop on Thursday as the euro zone economy fell short of overall market expectations. The main indexes across Europe were down, with the FTSE 100 down 2.27%, the DAX down 3.58% and the CAC 40 down 3.58%.
The markets took ECB President Mario Draghi’s comments as a negative sign when Draghi offered the markets the bare minimum of easing. The ECB was expected to have more aggressive stimulus efforts. The ECB also cut its inflation forecast from 1.1% to 1% for 2016.
In the past few months, many analysts have been bullish on European equities for 2016. With a high probability that the Fed will raise rates in December, many investors believe that U.S. equities have reached a peak. According to Mark Haefele, chief investment officer of UBS, “Improving growth and ultra-loose monetary policy should support profits in the euro zone”.
Renminbi Chinese Yuan
Our RMB Chinese Yuan ETF page has been trending, with traffic increasing by 24% this week. On November 29, the IMF announced that it will include the yuan in the Special Drawing Rights (SDR) basket, which will make the yuan an international reserve currency, effective October 1, 2016. The renminbi will make up about 11% of the basket of currencies that defines the value of SDR.
Going forward, there are three explicit implications for the yuan, the first one being that demand for the currency will increase. Second, other currencies will lose exposure; the euro is losing 6.5% and the pound 3.2%. Third, the PBOC will have to improve its transparency now that it has to communicate more with international markets. For more information on what is next for China and the yuan please refer to our article Chinese Yuan Recognized as Reserve Currency by IMF: What Next?.
Our Brazil ETF page was trending this week, with traffic increasing by 20%. Brazil’s GDP came in worse than expected at negative 4.5% in the third quarter from a year ago. This prolongs the recession in Brazil and is the worst contraction the country has seen since 1996, when Brazil started measuring GDP by the current system. After such terrible economic news, economists cut GDP forecasts further for 2016.
On the bright side, Congress is investigating potential accounting issues President Dilma Rousseff might be involved in with regards to the reported public financial numbers. Although we saw a rally for Brazilian equities and ETFs on Thursday, it was mainly due to short sellers covering their positions.
From a fundamental perspective, Brazil is doing terribly economically and that is expected to continue in the coming year, leading to an economic depression. One bearish play is the UltraShort MSCI Brazil ETF (BZQ ). BZQ is a 2x leveraged inverse ETF with Brazilian exposure and is the only inverse Brazilian ETF in our database. But remember, holding leveraged ETFs for a prolonged time period is not a good idea as fees and volatility will eat away at returns over time. Another option is to short Brazil ETFs such as the iShares MSCI Brazil Capped ETF (EWZ ).
The Bottom Line
This week saw different themes trending. Renewable energy was the main trend due to the Paris Climate Change Conference, which started this past Monday. Currencies, especially the euro, delivered a surprise and European equities were also trending as they were hit by the news from the ECB. Indexes across Europe fell more than 2%. One of the biggest news items this week was the Chinese yuan entering the IMF’s Special Drawing Rights (SDR) basket. This will make the yuan an international reserve currency effective October 1, 2016. Other BRIC nations, such as Brazil, were also trending this week, given Brazil’s worse-than-expected GDP figure, which came in at negative 4.5% in the third quarter year over year.
By analyzing how you, our valued readers, search our property each week, we hope to uncover important trends that will help you understand how the market is behaving so you can fine-tune your investment strategy. At the end of the week, we’ll share these trends, giving you better insight into the relevant market events that will allow you to make more valuable decisions for your portfolio.