The Fed's dovish comments in its latest FOMC meeting last Thursday added to the global slowdown concerns and increased volatility, triggering another wave of stock selling worldwide. This is especially true as both the S&P 500 and Dow Jones Industrial recorded losses in the four sessions out of the five since the meeting, plunging nearly 2.8% each during the same time period.
The Fed kept its interest rates unchanged citing a weak global economy, low inflation, falling commodity prices and instability in financial markets, though the U.S. economy is improving at a moderate pace. This suggests that cheap money flows will be in place for longer than expected and would increase the appetite for riskier assets. Investors should note that the near-zero rates have allowed the U.S. stock market to complete a spectacular six-year bull-run.
Additionally, the demand for high yield securities returned with the Fed's unchanged policy while Treasury yields fell to the lowest level in one month. Further, the move has given a fresh lease life to the emerging market stocks (read: ETF Winners & Losers Post Dovish Fed Meet ).
As a result, we have highlighted five hot ETFs that have seen respectable inflows following the Fed 'no rates hike' decision, as per the etf.com :
iShares MSCI Emerging Markets ETF ( EEM )
It is the most popular and widely traded emerging market ETF with AUM of $22 billion and average daily volume of more than 55.3 million shares. The product topped the list of asset gatherers, having accumulated about $1 billion in assets in the past few trading sessions while charging 68 bps in fees per year from investors.
The fund tracks the MSCI Emerging Markets Index and holds 847 securities with each holding no more than 3.18% of assets. However, the product is tilted toward the financial sector at 28.5%, followed by information technology (18.1%). Among the emerging countries, China takes the top spot at 23.6% while South Korea and Taiwan round off the next two spots with double-digit exposure each. The fund shed 5.7% over the past five trading days and has a Zacks ETF Rank of 3 or 'Hold' rating with a Medium risk outlook.
PowerShares QQQ ETF ( QQQ )
This fund tracks the Nasdaq-100 Index, which measures the performance of the largest domestic and international non-financial companies listed on the Nasdaq Stock Market based on market capitalization. Holding 109 stocks, the fund is concentrated on the top firm - Apple ( AAPL ) - at 13.2% while other firms hold less than 7.2% of assets. While information technology dominates the fund's portfolio with 54.7% share, consumer discretionary and health care account for double-digit exposure each (read: Is iCar on its Way? Apple ETFs to Buy on Optimism ).
QQQ sees inflows of over $565 million within a week following the Fed move and AUM totals $36.9 billion. It trades in average daily volume of more than 32.8 million shares and charges 20 bps in annual fees. The fund has lost 2.5% over the past five days and has a Zacks ETF Rank of 2 or 'Buy' rating with a Medium risk outlook.
iShares Russell 2000 ( IWM )
This fund pulled in $437 million in capital, propelling the total asset base to $27.4 billion. It offers exposure to the small cap segment of the broader U.S. equity market by tracking the Russell 2000 Index. Holding 1960 securities in its basket, the product is well spread out across components as none of these holds more than 0.31% of assets.
Sector wise, financials takes the top spot with one-fourth share, followed by information technology (17%), health care (16.8%), consumer discretionary (14.5%) and industrials (12.2%). The product is extremely liquid, trading in average volumes of more than 32 billion shares a day and charging 20 bps in annual fees. It lost nearly 3% over the past five days and has a Zacks ETF Rank of 2 with a High risk outlook.
iShares 20+ Year Treasury Bond ETF ( TLT )
This product targets the long end of the yield curve with maturity of greater than 20 years by tracking the Barclays Capital U.S. 20+ Year Treasury Bond Index and holds 30 securities. It gathered more than $300 million in capital following the FOMC meeting. This took the fund's asset base to around $6.2 billion (read: Are Treasuries the Best Safe Haven ETFs Now? ).
The ETF charges 0.15% in expense ratio while trades in solid volume of more than 9 million shares per day. The average maturity comes in 26.78 years and effective duration is 17.36 years. The fund focuses on the top credit rating bonds (AAA). It added nearly 2.5% in the trailing five-day period and has a Zacks ETF Rank of 2 with a High risk outlook.
SPDR Barclays Capital High Yield Bond ETF ( JNK )
This product has accumulated about $249 million in its asset base over the past few trading sessions, propelling its AUM to $10 billion. It offers exposure to the high yield corner of the bond ETF world and follows the Barclays High Yield Very Liquid Index. The fund holds 786 low-rated (BB and lower) corporate bonds with average maturity of 6.13 years and modified adjusted duration of 4.33 years.
Expense ratio came in at 0.40% while volume is good as the fund exchanges nearly 8 million shares a day. JNK is down over 1% in the same time period and has a Zacks ETF Rank of 4 or 'Sell' rating with a High risk outlook (read: Junk Bond ETFs: A Trouble Zone ).
These ETFs have been gathering immense investors' love, especially as the Fed stands pat. The trend might continue in the months ahead as global worries are unlikely to end anytime soon and may thus delay the Fed's rate hike plan at least to end of this year.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.