The broad markets are riding high on growing confidence in the
global economy, robust Q3 earnings growth, and a falling U.S
dollar. In fact, this has been a solid earnings season with most
companies reporting earnings above expectations.
The world's second largest economy, China, picked up in the third
quarter with manufacturing sector growth at its seven-month high.
The uptrend in developed economies like the U.S. and Europe and
stabilizing emerging economies are leading to growth in the world
Play a Resurgent Europe with These ETFs
Though the U.S. is showing signs of recovery, some recent data such
as disappointing job numbers, weak manufacturing growth and fading
consumer confidence suggest that the Fed is unlikely to curtail
monetary stimulus anytime soon.
Further, the fear of another shutdown and debt ceiling debacle in
early 2014 is surfacing, and adding to the Fed's caution (read:
3 Safe ETFs to Buy in the Next Shutdown
In such a backdrop, the greenback remained under immense pressure
touching an eight-month low against a basket of currencies, while
gold is gaining traction, and is now well off of its 2013
lows. This trend is expected to continue in the near future if
the Fed does not engage in tapering and slow momentum falters
growth in the world's largest economy.
This situation might be interesting for some investors seeking to
play the current rising equity markets and falling dollar
simultaneously in the basket form. For those investors, there are a
few options, most notably
ETRACS S&P 500 Gold Hedged Index ETN (
However, the fund remains relatively unknown as it has only amassed
$18.9 million in assets and sees light volumes on most days. Given
this, it might be worth it to shed some light on this ETN for those
who are unfamiliar with the product, but are thinking about jumping
in on the space (see:
all the Large Cap ETFs here
The ETN follows the S&P 500 Gold Hedged Index, which uses a
unique strategy for investing into the space. The note seeks to
provide exposure to the U.S. large cap equities through the S&P
500 Total Return Index while simultaneously offering a long
position in the near term gold futures contracts to hedge against
any fall in the U.S. dollar.
The expense ratio came in at 0.85%, which is high when compared to
many other choices in the space. Since the index is rebalanced
monthly, the product is suitable for investors who can manage their
portfolio on a monthly basis (read:
Gold Mining ETFs Rebound: Can It Last?
Based on fundamentals, it appears that the ETN is poised to move
higher in the coming months, as both large cap stocks and gold are
ready to rise. Further, the upward trend is confirmed when looking
at the technical perspective.
The fund recently broke out its near-term range of around $47.00
and is currently trading higher with short-term moving averages
above long-term levels. The 9-Day EMA is now comfortably above the
longer-term 200-Day EMA, suggesting bullishness for this ETN.
This is further confirmed by the recent upswing in the Parabolic
SAR, although this figure should definitely be monitored closely
(see more in the
This unloved large cap ETN could be a ticket to investors closing
out 2013 given its unique feature and strong macro fundamentals.
The product provides a nice combination of rising stock prices and
a hedge against currency risks as well.
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