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Zacks: Buy GLD Amid Falling Dollar, Trump Worries, & Seasonal Stock Weakness

From Zacks: We have exited a Trump-heavy January, seen another month of equity gains and stepped into the second month of 2017. By now, the investing cohort must have started to prepare for a correction in the market.

The U.S. markets had a steep ascent since Trump’s win. Now, the Trump rally seems to be waning. As per analysts, “looking at all post-election years going back to 1950, February has been down 1.8% on average -– making it the worst month of the year.”

Moreover, the final days of January gave such cues. President Trump’s debatable plans and policies regarding immigration and trade rattled investors’ nerves (read: 5 ETF Investing Mistakes You Must Avoid).

Moreover, the U.S. GDP growth data for Q4 came in lower than expected. The U.S. economy grew an annualized 1.9% on quarter in Q4, lower than 3.5% expansion in Q3 and shy off market expectations of 2.2%. This caused market gyrations to start February and must have stirred investors’ hunt for quality investments.

This is especially true given the month’s cursed seasonality in the equity market. A consensus carried out from 1950 to 2016 shows that January ended up offering positive stock returns in 39 years and negative returns in 28 years, per moneychimp.com, with an average return of negative 0.05%.

All these make it more important to pin point ETFs that could safeguard investors from any steep and sudden market swing as well as earn some gains.

SPDR Gold Shares (GLDFree Report)

As the greenback saw the worst of a year in three decades, gold got back its shine and is likely to maintain the momentum in February. Investors should note that there was no change in the yield on benchmark U.S. treasury bonds in January, which stayed at 2.45%. A lower greenback and the sudden safe haven demand should brighten up gold bullion, benefiting bullion ETF SPDR Gold Shares (GLDFree Report) (read: Does The Donald Hold The Trump Card for Gold ETFs?).

The SPDR Gold Trust ETF (NYSE:GLD) fell $0.41 (-0.35%) in premarket trading Friday. Year-to-date, GLD has gained 5.68%, versus a 1.90% rise in the benchmark S&P 500 index during the same period.

GLD currently has an ETF Daily News SMART Grade of B (Buy), and is ranked #3 of 33 ETFs in the Precious Metals ETFs category.

PowerShares S&P International Developed Low Volatility Portfolio ETF (IDLV)

Now, in times of political uncertainty – thanks to Trump and Brexit – a look at developed economies with low volatile focus makes sense. Several developed economies are approaching a state of stabilization thanks to the prolonged easy money policy. The fund has a Zacks Rank #3 (Hold) with a low risk outlook. The fund yields about 3.78% (as of January 31, 2017).

Reality Shares Divcon Dividend Defender ETF (DFNDFree Report)

The fund invests 75% of its portfolio in large-cap U.S. companies with the highest probability of raising their dividends within a year, based on their DIVCON dividend health scores. Also, the fund features a hedged (long/short) equity portfolio that may provide more stable returns than a long-only equity portfolio. In a volatile market as we are witnessing now, such an approach may prove profitable.

WisdomTree Emerging Markets Consumer Growth ETF (EMCGFree Report)

Emerging markets (EM) look much better positioned at the current level. While a weaker greenback, and an expected check on the U.S. Treasury yield would benefit this segment, a huge consuming class should benefit EMCG.

Also, EM looks less perturbed by Brexit. Trade relations between the U.K. and the broad-based emerging market are meager, thus posing no-to-little threat to emerging market investing. Most of these EM funds offer cheaper valuation. Also, to boost growth, several emerging economies have been resorting to policy easing via interest rate cuts (read: What Can Make EM ETFs a Winner in 2017?)

VanEck Vectors Morningstar Wide Moat ETF (MOATFree Report)

The fund follows an index which tracks the overall performance of the “attractively priced companies with sustainable competitive advantages.” As a result, this fund also calls for quality exposure (read: Time to Prepare for ‘Trump Slump’ with These ETFs?).

ValueShares US Quantitative Value ETF (QVALFree Report)

The fund is actively managed and employs a systematic procedure to recognize the right stocks for investment. Since February is known for poor equity returns, a look at such unique value exposure is warranted(read: Forget Growth, Buy These Value ETFs Instead).


This article is brought to you courtesy of Zacks Research.

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