By
Gary Gordon
:
In the steamy September days (9/13-9/14) of central bank
euphoria, Federal Reserve Chairman Ben Bernanke announced that the
Fed would immediately begin purchasing $40 billion in
mortgage-backed securities each month. What's more, the chairman
did not include an end date for the quantitative easing program
known as "QE3."
Bernanke's summertime bazooka sent S&P 500 stocks skyward,
as the heralded benchmark hit an intra-day level of 1474. And
scores of media players began chatting up the possibility of
year-end highs in the mid-1500s.
One month later, however, the S&P 500 has shed some 50
points off of its 52-week peak. Perhaps ironically, the declines
have occurred in spite of the best consumer sentiment reading in
five years, as well as the lowest unemployment rate reading in
three and a half years.
Does this mean that QE3 has essentially lost its mojo? Is it a
classic case of buy the rumor, sell the news? To some extent… yes
on both.
There has also been a shift in focus back to a number of poor
earnings reports, as well as a rekindling of the European debt
crisis. Most notably, Spain has yet to budge on agreeing to the
European Central Bank's (ECB) bailout terms.
Nevertheless, QE3 is still benefiting
ETF investors with a longer-term focus
. For instance, the electronic creation of new U.S. dollars,
coupled with waning demand for treasuries is bolstering corporate
debt. Even more eye-catching, investors are attracted to emerging
market corporate debt as well as currencies backed by countries
with less desperate monetary policies.
For instance, WisdomTree Emerging Market Bond (
EMCB
) hasn't missed a beat over the prior month, surging 5.3% in price
over the previous three months. EMCB remains well above its 50-day
moving average and reports an annual distribution yield of
4.5%.
(click images to enlarge)
(click to enlarge)
WisdomTree also offers the Dreyfus Emerging Currency Fund (
CEW
). Some of the constituents include the Mexican peso, Brazilian
real, Chilean peso, South African rand, Chinese yuan and Malaysian
ringgit. For those who believe that the "emergers" are doing less
damage to their currencies, CEW is proving to be a sensible way to
diversify currency exposure across the developing country
landscape. In addition, CEW is above both its 50-day, as well as
its 200-day trendline.
(click to enlarge)
Others may be more comfortable with individual currencies that
have shown remarkable strength since the president of the ECB,
Mario Draghi,
pledged to do whatever it takes
to save the euro. One of the most impressive currencies in terms of
relative strength has been the Indian rupee. ETF enthusiasts could
consider the WisdomTree Dreyfus Indian Rupee Fund (
ICN
).
(click to enlarge)
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Disclosure:
Gary Gordon, MS, CFP is the president of Pacific Park Financial,
Inc., a Registered Investment Adviser with the SEC. Gary Gordon,
Pacific Park Financial, Inc, and/or its clients may hold positions
in the ETFs, mutual funds, and/or any investment asset mentioned
above. The commentary does not constitute individualized investment
advice. The opinions offered herein are not personalized
recommendations to buy, sell or hold securities. At times, issuers
of exchange-traded products compensate Pacific Park Financial, Inc.
or its subsidiaries for advertising at the ETF Expert web site. ETF
Expert content is created independently of any advertising
relationships.
See also
Mounting Pressure
on seekingalpha.com