With the first half of 2012 coming to a close, investors find
themselves perhaps only partially through a rocky roller coaster
ride. Europe has undeniably been the story of 2012 to this point,
and will likely continue to steer global equity markets in the
second half. So it's no surprise perhaps that there are plenty of
interesting performance and volatility figures from the Europe ETFs
that have become increasingly popular as trading vehicles amidst
the volatility. The gaps between the strong and weak members of the
euro zone have perhaps never been greater-as shown nicely
Below, we profile three interesting ETF charts that show some
surprising (and, perhaps, some expected) gaps between somewhat
MSCI Germany Index Fund (
) vs. MSCI Spain Index Fund (
Not surprisingly, Germany has left Spain in its wake. Two of
Europe's largest economies have exhibited strong correlations in
2012, but have gone in opposite directions. The chart below
highlights the widening gap between the few fiscally strong
countries in Europe and the weak links that make up the PIIGS bloc.
While EWG is in positive territory for the year, the Spain ETF has
click all images to enlarge
(click to enlarge)
PowerShares DB Italian Treasury Bond Futures ETN (
) vs. PowerShares DB German Bund Futures ETN (
Just to show the unpredictable nature of the current environment,
we're including a comparison of two ETNs that target European debt.
ITLY focuses on futures contracts linked to Italian bonds, while
BUND offers access to
markets. The chart below might be somewhat surprising; many
investors probably suspected that the "flight to quality" would
have battered Italian bonds and benefited German debt. But Italian
bonds have actually surged in 2012, despite the lingering concerns
about the fiscal viability of both Italy and the euro zone.
If anything, the chart below shows the opportunities that have
been created by the back-and-forth movements in Europe; investors
able to identify battered asset classes poised to rally can make
some handsome returns.
(click to enlarge)
S&P 500 SPDR (
) vs. PowerShares S&P 500 Low Volatility Portfolio (SPLV)
Head to Head:
Though SPY stormed out to a huge lead as stocks headed higher in
the beginning of the year, SPLV made up a lot of ground during the
sudden plunge in May. While investors playing a
low volatility strategy
were no doubt frustrated by the gap that emerged during the first
quarter, the hectic month of May was very rewarding. Though both
are comfortably in positive territory on the year, SPLV has been
the better performer-a result that lends credibility to the
investment thesis behind low volatility strategies.
So far in 2012, it has been slow and steady that is winning the
race. What is remarkable about the chart below is the comparison
between these two ETFs-which have considerable overlap of
holdings-during the month of May.
No positions at time of writing.
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