As we get ready to start a new year, we asked ETF strategists what ETFs are at the top of their lists for 2016, and why.
Here’s what they had to say:
Scott Kubie, chief strategist of CLS Investments in Omaha, Nebraska, a strategist focused on active asset allocation decision with an eye for global opportunities:
- iShares MSCI Spain (EWP | B-95): Spain’s improved competitiveness will support its fundamentals and the euro’s current stability will keep rates low. As long as policy reforms continue to produce economic growth, Spain looks attractive.
- iShares MSCI Quality Factor (QUAL | A-77): We expect stock market volatility to be higher and the debt markets to be less liquid. High-quality firms tend to exhibit lower-risk characteristics than most companies and produce sufficient free cash flow to fund much of their internal investment.
Stephen Blumenthal, founder and CEO of CMG Capital Management Group in King of Prussia, Pennsylvania, a strategist specializing in using quantitative processes to identify areas of strong relative price leadership:
- O’Shares FTSE Asia Pacific Quality Dividend Hedged (OAPH): A smart-beta ETF focusing on companies that meet certain requirements for market capitalization, liquidity, quality, low volatility and high dividend yield. I believe Asian equities may benefit from ongoing central bank currency wars and QE stimulus, but I anticipate Asian currencies may depreciate against the dollar. The Fed is exiting QE, while the European Central Bank, Japan and China are stepping on their accelerators. OAPH hedges away the currency-related risks.
- Market Vectors Double Short Euro ETN (DRR): Provides aggressive investors with a liquid investment tool that profits when the euro declines versus the dollar. Central bankers will remain on the front pages in 2016. Unimaginably high European debt-to-GDP, high unemployment and a fracturing European Union have led to negative interest rates in Germany and other European countries. Comparatively, U.S. rates are much higher, with the Fed raising rates and moving away from stimulus. Globally, money moves to where it is treated best. This favors a strong U.S. dollar. I expect further decline of the euro versus the U.S. dollar.
- iShares North American Tech-Software (IGV | A-52): Includes exposure to business security, home entertainment (video games) and customer relationship cloud-based software. There are areas that are seeing strong business and consumer demand. Interestingly, global capital flows to the U.S. may provide additional support despite the aged and expensively priced U.S. equity market. One particular area that is seeing strong relative price strength is technology. I favor growth over value in the U.S., and my top sector pick is software and technology. Here too, ETFs offer a targeted way to seek investment return. Top holdings include Microsoft, Adobe Systems and Salesforce.