Those not living under a rock know that Federal Reserve
Chairman Ben Bernanke testifies before the Joint Economic
Committee today. Following Wednesday's stock market rally, which
was due in large part to speculation that the Fed may engage in
further asset-buying programs, Bernanke now holds the cards when
it comes to determining the near-term fate of riskier assets.
Other Fed members have dropped some hints about more
quantitative easing and for his part, Bernanke hasn't completely
ruled it out. On the other hand, he hasn't overtly endorsed the
idea of QE3, either. With Operation Twist ending at the end of
this month and the U.S. economic recovery still fragile, traders
will be held hostage by Bernanke's comments today and any
verbiage that is construed as a blow to QE3 hopes could easily
send markets tumbling.
With long-term interest rates at record lows, betting on the
prospect of more quantitative easing doesn't seem like a winning
prospect, but traders can find ETF winners and losers for the
Bernanke testimony right here.
SPDR Gold Shares (NYSE:
Or the iShares Gold Trust (NYSE:
). Both GLD and IAU are obvious, yet important plays on Uncle
Ben's comments. Spot gold was trading around $1,620 an ounce in
Asian trading following a modest gain for COMEX gold on
This is the reality for gold bugs: Bernanke probably isn't the
biggest gold fan out there, but his policies to this point have
fanned the flames of gold's rally over the past several years.
Does gold absolutely need more easing to move higher? No. Would
gold get a lift from more easing? Yes. The yellow metal's move
away from risk status could be tested tomorrow and the response
will be telling about how gold will behave over the next few
SPDR S&P Homebuilders ETF (NYSE:
It's likely that Bernanke will chime in on the health of the U.S.
housing market and those comments could reduce or increase XHB's
vulnerability. Prior to the start of May, XHB had been one of the
better performing sectors ETFs in 2012, but this fund's
constituency is just too sensitive to economic data to make this
ETF durable in the current environment of bleak data points.
Bottom line for traders: Bernanke will chart XHB's course on
Thursday and for several days beyond.
Market Vectors High-Yield Muni ETF (NYSE:
Let's wax hypothetical for the moment and say that Bernanke does
overtly say more QE is on the way. That would be a killer for
Treasuries and probably chase investors out of scores of bond
funds, but municipal bonds could prove resilient even in the face
of more easing.
have proven sturdy in the face of headwinds
specific to the asset class, so it's not likely Bernanke's whims
will impact HYD beyond the next few days
. Beyond that, if more QE is on the way, some investors will
still want some bond exposure and HYD has the right combination
of robust yield and low default risk to remain a solid
Vanguard MSCI Emerging Markets ETF (NYSE:
Emerging markets ETFs have a tendency to react to Bernanke's
comments, particularly when the Fed chairman endorses an
accommodating monetary policy. Down 8.1% in the past month, VWO
and its rivals need all the help they can get and it doesn't
matter where it comes from. The rub here is that Bernanke is the
chairman of the U.S. central bank and his counterparts in the
countries represented in VWO can do enough on their own to hamper
Other emerging markets plays that Bernanke could bolster:
iShares MSCI Brazil Index Fund (NYSE:
), iShares South Korea Index Fund (NYSE:
) and the Global X FTSE Colombia 20 ETF (NYSE:
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