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 was no central theme in our trends this week, as the components of our list have little in common. However, perhaps the only conclusion that could be inferred is that emerging markets are again attracting our readers, with ETFs offering exposure to China and India taking the second and fourth place, respectively. Elsewhere, the page tracking the S&P High Yield Dividend Aristocrats drew the most attention, while Pharmaceuticals ETFs and Real Estate are on the bottom of the list.
S&P High Yield Dividend Aristocrats Index: Dividend Kings Take Over
Our S&P High Yield Dividend Aristocrats Index page has seen its traffic rise over 62% this past week compared to the week-ago period. There is only one ETF attempting to simulate the index’s performance, SPDR S&P Dividend ETF (SDY ), which has risen nearly 1% over the past five days. Year-to-date the dividend kings index has jumped 11%, comfortably beating the S&P 500 index, up just 3% over the same period.
Last month, six members of the index containing more than 100 blue-chip companies have increased their dividend, with many more expected to do so in June. Among the companies that raised their payout are healthcare services firm Cardinal Health (CAH), which raised its dividend by 16% to a yield of 2.3% and home improvement retailer Lowe’s Companies (LOW) – dividend up 25% to a yield of about 1.7%.
Over the last year, the index has offered better returns than the average market, as well as lower volatility. The index is well diversified into all sectors and has relatively safer large cap companies that have been increasing their dividends for years. The index could be particularly attractive in an uncertain macroeconomic environment such as the current one, with mixed signals from economies around the world making it hard to paint a clear picture. Investing in an instrument that would offer some protection from volatility in case of a storm, but also exposure to a positive macroeconomic scenario, could be indeed the way to go.
China Equities: Preparing for the Worst
Our page covering ETFs providing exposure to Chinese equities has seen its viewership jump about 44% week-over-week, but there is hardly any positive reason for the renewed interest in the country. Despite staging a 2% rally over the past five days, iShares China Large-Cap (FXI ) is down more than 5% since the beginning of the year.
A continuation of the rebound seems unlikely. The short interest in the Chinese equities currently stands at the highest level in a year, according to Bloomberg data. Last time there was such a high interest in shorting the country’s equities at the same time last year, it was followed by a route that took the global markets down in August. Many stock markets, particularly in Europe, have not yet recovered from that steep decline.
A potential Federal Reserve rate hike in June is also expected to prove a drag on the country’s currency – the renminbi. The real danger, however, comes from the inside, particularly China’s rapidly rising debt.
Pharmaceuticals: Recovering Slowly
Betting on the pharmaceutical industry should pay off handsomely in the long run, but in the near term the sector is facing headwinds, with several companies lambasted by the U.S. government for their predatory pricing practices. Our page tracking pharmaceutical ETFs saw its traffic rise nearly 38% week-over-week, as the stocks are attempting to stage a recovery. For example, the iShares U.S. Pharmaceuticals ETF (IHE ) has increased about 2.5% in the past five days, but remains down about 9% since the start of the year.
Battered by a commitment from Democratic presidential frontrunner Hillary Clinton to crack down on drug-price hikes months ago, the pharma industry has resorted to M&A and non-core divestitures to improve shareholder value. A big pharma transaction between Pfizer (PFE) and Allergan (AGN) was called off, after regulators made it less attractive for them to merge by changing regulatory rules.
India: Ready to Take Off
Our India ETFs list page has attracted about 29% more viewers this past week compared to the last, as many India ETFs have risen over the past five days. For example, iShares India 50 (INDY ) has jumped more than 3% in the past week, bringing year-to-date performance into positive territory.
The Indian ETFs have been boosted by a recent note from Morgan Stanley recommending investors buy the country’s equities, largely because they became more attractive compared to other emerging markets. Among fundamental reasons cited by the investment outfit are the potential for further monetary easing by the central bank, rising dividends, and the possible introduction of the so-called Goods and Services Tax Bill. This bill aims to replace the existing tax system with one similar to a value-added tax. The move is expected to make it easier for authorities to collect taxes and reduce the tax burden on consumers.
Real Estate: Fed Weighs
Real Estate ETFs have been a popular asset class with investors in the current low interest rate environment because of their relatively safe and high dividends. Our page tracking the sector saw its viewership rise 25% this past week compared to the last one, despite many REIT ETFs showing flat gains amid a rising broad market. Vanguard REIT (VNQ ) has increased less than 1% in the past five days, and is up roughly 5% since the beginning of the year.
The real estate market has performed relatively well since the beginning of the year, but the path forward is filled with risks, mainly coming in the form of higher interest rates. The Federal Reserve has hinted on more than one occasion that it is prepared to raise its benchmark rate in the coming months for a second time. That would make REITs less attractive to hold because higher rates increase interest expenses for these trusts.
The Bottom Line
Readers have shown interest in the S&P High Yield Dividend Aristocrats, as several companies raised their payout to shareholders in the past month. Emerging markets have also attracted interest, with India and China making it to our list. While India is viewed as a potentially good investment by analysts, China is filled with risk; particularly its high debt. The Pharmaceutical industry took the third place, as it attempts to rebound following the price gouging debacle. Meanwhile, REITs’ good performance may be at risk because the Federal Reserve signaled it may raise rates.
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.