ETFdb.com analyzes the search patterns of our visitors each week. By sharing these trends with our readers, we hope to provide insights into what the financial world is concerned about and how to position your portfolio. There’ is a mix of trends this week, from emerging-market ETFs to safe investments, such as silver, and a stable dividend-paying ETF. The British pound has also been on investors’ minds as they search for ways to play the currency’s recent rally.
Emerging Markets
Emerging-market ETFs saw the most impressive gain in attention over the past week. In fact, viewership has increased over 273% in the last week alone. There are several ETFs that an investor can use to play emerging markets, such as (VWO ), (IEMG ), and (EEM ). All have been stabilizing from the fall in the general market at the start of the year.
Two important items have led to support in the market: the stabilization of oil prices and slowing outflows from emerging-market funds.
Stability in oil prices is the main driver for nearly all trends this week as investors seem to have stopped the precipitous slide of prices started last year. As oil prices have stabilized, emerging markets, whose economies have benefited from higher oil and commodity prices, have been granted a reprieve from the staggering price drops in raw materials. At the same time, outflows from these funds have stopped, indicating that investors are feeling more secure in their future.
High-Yield Dividend ETFs
Interest in high-yield dividend ETFs has increased. Our High-Yield Dividend Aristocrats Index page saw an increase of 219% in traffic this week. There is only one ETF that tracks the High-Yield Dividend Aristocrats Index, the SPDR S&P Dividend ETF (SDY ).
This increased interest for high-yield dividends comes from investors seeking to gain exposure to stable dividend-paying stocks given the current market uncertainty. SDY only holds companies that have consistently increased their dividends for the last 25 years.
SDY has outperformed the broader market as measured by the S&P 500 ETF (SPY ) YTD. Even though it seems that things might be stabilizing, as seen by the stabilization of oil prices, we’re not out of the woods just yet. Volatility is still expected to be high and more market turmoil is ahead. Having said that, stable dividend-paying stocks and ETFs will continue to be in demand and have a high chance of outperforming the overall market in the current uncertainty.
China Equity
Our China equity ETFs page has seen an increase in viewership of 61% this past week. The Chinese markets are clearly the elephant in the room when it comes to the global economy and where markets will be in the near future. There are several ETFs to look at when it comes to the Chinese market, primarily (FXI ).
Over the past several months, the influence of the Chinese equity market on world markets has been huge. However, this past week might indicate that the impact is diminishing. The Chinese government has made another change to its reserve requirements, decreasing the amount required by 0.5% this past Monday. In the past, this might have been interpreted as another negative sign that the Chinese economy is weakening. However, this time the world markets, and the U.S. in particular, shrugged off the change in reserves.
While the market might not be worried about the new reserves, there is room for concern. It is possible that instead of investing this money in the ailing Chinese economy, the money will be shipped overseas to seek out better yields. Thus, any efforts to stabilize the Chinese economy may not work out and the market may continue its downward slope.
British Pound
Trading in the British pound has continued to see interest from investors in the forex world. Our British pound ETFs page has seen increased interest over the last few weeks, with a 35% increase in traffic to the page. The ETF that may capture most of the movement in the pound will be the CurrencyShares British Pound Sterling Trust (FXB ).
While exchange rates are always a hotbed of activity for investors, the interest in the pound seems to be focused on the potential strength of the British economy, as would be expected with an appreciating pound this week. The latest increase seems to be due to the fact that the British economy is doing better than expected. As the numbers come in stronger, pointing to a better economy, the pound is viewed as a stronger asset than other currencies. That strength has caused net short investors on the pound to cover; thus, the pound has two positive factors going for it right now. The first is the general bullishness on the British economy, and the second is shorts trying to cover before they are on the losing end of this trade.
The downside is that there’s still the Brexit to fear, which was the main reason why the pound was hit so hard these last few months before this short recovery. We believe the British pound is not out of the woods yet and will show more bearish signs going forward.
Silver ETFs
The final trend seen this past week on our ETF pages was in the silver arena. The silver ETFs page saw a 28% increase in traffic. The silver ETF market only has a few funds that track the physical price of the metal, (SLV ) being the most popular.
The silver market has been seeing a resurgence due to the modest recovery in the commodity markets. In fact, silver is often associated with the gold market and is even called the poor man’s gold. This relationship between gold and silver is one of the primary drivers of this market and should be the item to which most investors pay attention in the potential movement of the precious metals. Currently, silver is significantly underperforming the past movement of gold, and as such, may appreciate in the short term. It is only a matter of time before either gold falls back to its historical ratio with silver or silver moves up to this ratio point.
The Bottom Line
The overriding influence on trends this past week has been the stabilization of oil prices. The price of oil remains at a 70% discount to where it was a year ago. However, the price is now in a new trading range of $30 to $35, with fewer calls that it is falling to the teens. Oil could resume its downfall, but the underlying economic forces seem to indicate that it has found a new resistance level.
Increasingly, OPEC members indicate they will defend the new price range. If this is true, then emerging markets, high-yield ETFs, and commodities should have found some support and investors can begin to move into these markets again. Further, the oil market’s stabilization could influence the Chinese economy by providing more support to this still developing world economy.
