The Fed shocked the markets last week with their decision to not
taper QE levels at all. Many investors were looking for at least
$10 billion in reductions per month, so holding off yet again was a
bit of a surprise.
This lack of tapering, along with some backtracking from Bernanke
on bond buying reductions this year, had a huge impact on markets.
Stocks soared while Treasury bond yields slumped following this
news, leading some to believe that a new bull market may be at
hand, assuming that D.C. can get their act together.
The Biggest Winner from the Taper
Speculation about the taper has had a horrendous impact on a few
key market segments. Those that are sensitive to changes in rates
along with emerging markets have been the biggest hit over the past
few months as more investors accepted a tapering fate.
However, now that the taper has been put on hold, some of these
segments could be interesting picks for the medium term. These
could rebound as investors embrace a risk on mentality and look to
solid dividend payers in some beaten down segments as great value
opportunities over the next few weeks (see
3 ETF Winners from the 'No Taper' Shocker
Below, we highlight a few of our favorite picks in these now
well-positioned corners of the market, any of which could make for
an interesting short-term addition for those seeking some
additional income to close out the year:
Easily one of the most impacted sectors by the Fed's policies
lately has been emerging markets. These were struggling under
significant outflows and declining confidence levels as investors
pulled out capital from these volatile nations.
With the Fed holding off on the taper though, we could see a more
sluggish dollar and a bit more of a risk-on attitude in the
marketplace over the next few weeks. Should this be the case,
emerging markets with higher payouts will definitely be top picks,
and seem poised to ride a rebound higher.
One easy way to play this trend is with the
SPDR S&P Emerging Markets Dividend ETF (
. This product follows the S&P Emerging Markets Dividend
Opportunities Index, holding about 130 stocks in its basket (read
Have You Overlooked These Dividend ETFs?
The fund is relatively well spread out across sectors, though
financials, utilities, and materials all make up at least 17% of
assets. Meanwhile, from a country look, Brazil (22%), China
(13.4%), and Taiwan (12.8%) take the top three spots.
The fund has come back a bit in recent trading sessions following
the taper news, while its 30-Day SEC yield of 6.3% represents a
great income play for investors in the short term.
Concerns were starting to build that the Fed's policies would
derail the budding recovery in the real estate market. After all,
rising rates were starting to dull the appeal of this corner of the
investing world, but with a lack of tapering, there is now fresh
This is also true in the international real estate sphere as
companies in this segment were hurt not only by the income side of
the Fed trade, but by a stronger dollar and declining global flows
too. Should these reverse, it could lead to some very solid trading
in the real estate market over the next few weeks.
One way to play this is with the
SPDR DJ Wilshire Global Real Estate ETF (
, an ETF that follows companies engaged in real estate operations
around the globe. This is done by tracking the Dow Jones Global
Select Real Estate Securities Index, a benchmark that gives us a
fund with about 200 stocks in its basket (see
all the Real Estate ETFs here
The focus of this product is on the U.S. market which makes up
roughly half the portfolio, while Japanese (10.7%), and Australian
(6.7%) companies round out the top three. In terms of sectors,
there is a pretty solid mix with Real Estate Operating Companies
(16.9%), taking the top spot, followed by Regional Malls (15.7%),
and Office (10.6%).
This ETF has really come on strong in the past few weeks, much like
the rest of the real estate space. The fund has actually added
about 4.6% in the past month, while its 30-Day SEC yield comes in
just below 3%.
Master Limited Partnerships (MLPs) are another yield play that
could be heavily impacted by the Fed's decision. These firms were
more stable than many of the others on the list, but they have also
slumped in the weeks leading up to the crucial meeting.
And now, much like real estate, investors will be looking for
higher income levels outside of the traditional bond sources,
leading to more positive trading for MLPs. Plus, given the
volatility in the broader market, these securities could be better
picks for investors wanting lower risk choices at this time.
While there are a number of options in this corner of the market,
one that offers an interesting combination of yield and exposure to
the space is the
Yorkville High Income MLP ETF (
. The fund follows the Solactive High Income MLP Index, which is a
benchmark of about 25 securities that are high yielders in the MLP
all the MLP ETFs here
Exploration & Production companies make up about two-fifths of
the portfolio, while marine transportation and downstream both
account for 20% of the ETF as well. No single security makes up
more than 6% of the fund though, so concentration risks aren't much
of an issue here.
Although the product has only added a bit in the wake of the 'no
taper' announcement, it could be well protected in the months ahead
should the QE program reductions remain off the table. Plus, with a
30-Day SEC Yield of 7.7%, the real focus of this product is income
anyway (also read
Buy These 3 ETFs for Excellent Dividend Growth
While the lack of a taper might have been good news for broad
markets, its impact was really felt in dividend, yield sensitive,
and emerging market segments. These corners were crushed as taper
talk intensified in the summer, and they could all see a relief
rally if the taper is put on hold for a little longer.
Just remember that eventually the taper is coming and these sectors
could be in for some trouble, much like they were in the summer.
But until then, these could be some rebounding segments that pay a
great yield and may see a solid level of capital appreciation over
the next few months as well.
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SPDR-SP EM DVD (EDIV): ETF Research Reports
SPDR-DJ W GL RE (RWO): ETF Research Reports
SIMON PROPERTY (SPG): Free Stock Analysis
YORKVL-HI MLP (YMLP): ETF Research Reports
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