Last Week In Review: ETF News And Blog Posts To 7/1/2012

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In case you missed it, here’s a summary of the ETF topics and market reviews I posted to my blog during the week ending on 7/1/2012.

Sharp losses early in the week were made up during last trading day of the month as the EU summit produced some agreement to help out Italian and French banks via a direct lending scheme.

Given the fact that these types of summits have in the past produced nothing of substance, any hopeful announcement turned out to be better than nothing and that provided sufficient ammunition to ramp the markets higher into a strong month end close.

As I posted a few days ago, I doubt that this euphoria will last for more than a few days as the devil is the details, which have not been worked out or agreed upon yet. These days, it does not take much more than an attention grabbing headline out of Europe to get the bulls excited; usually such response ends up being ephemeral in nature.

This week, we covered the following:

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Economist: Onus On ECB To Bring Down Borrowing Costs For Spain And Italy

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The European summit, ostensibly one of the many that will take place as the year wears on, that started in Brussels on Thursday created a lot of expectations around comprehensive policy measures needed to reign in the European crisis.

Global markets are looking at tangible outcomes rather than statements that merely outline purposes, although the initial market reaction begged to differ. To be more specific, markets will be looking at some sort of announcement on the three pillars required for greater European integration, namely the fiscal union, the banking union and political union, says Marie Diron, economist at Oxford Economics and an adviser to Ernst & Young LLP. These are medium to long term measures that businesses and investors would like to see before confidence returns to the market.

In the short run however, the onus to act lies with the European Central Bank since it can move very quickly and start buying Spanish and Italian bonds that will bring down borrowing costs. Also economic growth should be given prominence and pushed higher up the pecking order involving some investments that can create jobs in a hurry. Also reforming the labor markets to bring back competitiveness, especially the peripheral markets, should be high on the agenda.

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New ETFs On The Block: State Street’s Crossover Corporate Bond ETF (XOVR)

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Boston-based ETF issuer State Street launched a crossover fixed income focused ETF last week as the market continues to rebalance its portfolio towards debt instruments.

The ETF industry has been quick to focus on segments that are often overlooked by investors through the launch of niche and novel products. The crossover segment of the bond market is one such example.

The SPDR BofA Merrill Lynch Crossover Corporate Bond ETF (XOVR) tracks the BofA Merrill Lynch US Diversified Crossover Corporate Index, a benchmark that includes both investment grade and junk corporate bonds with ratings between BBB and BB. The index components must have minimum one year to maturity with fixed coupon payments and at least $250 million in outstanding.

The benchmark is overweight on industrial bonds (more than 79 percent of total holdings) with a modified option-adjusted duration of 5.70 while yield-to-worst is estimated at a respectable 4.8 percent. Qualifying securities must be rated BBB1 through BB3, inclusive (based on average of Moody’s, S&P and Fitch) and XOVR is almost evenly split along the risk spectrum with 53 percent of the holdings rated Baa or higher.

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ETF/No Load Fund Tracker Newsletter For Friday, June 29, 2012

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ETF/No Load Fund Tracker StatSheet

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THE LINK TO OUR CURRENT ETF/MUTUAL FUND STATSHEET IS:

https://theetfbully.com/2012/06/weekly-statsheet-for-the-etfno-load-fund-tracker-newsletter-updated-through-06282012/

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Market Commentary

Friday, June 29, 2012

EXUBERANCE RULES ON EU PLAN FOR SPANISH LENDERS — BUT WILL IT LAST?

US stocks soared Friday with the Dow recording its biggest monthly gain in 2012 as European leaders struck a ground-breaking deal to bolster the economies of the affected members, pushing all the three major indexes up by more than five percent in the first-half of the year. Supporting the rally were short covering and quarter ending window dressing.

EU leaders agreed to ease lending conditions for Spain’s struggling banks and relaxed terms of possible help for Italy while consenting to a $149 billion economic growth plan for the single-currency region. At this point, it’s all euphoria, as we’ve seen before, and it remains to be an open question if this plan not only has merits but can actually be implemented.

One analyst succinctly stated that “for now, party on and turn that hourglass over as more time has been bought, but only the symptoms are being fought as the underlying disease of excessive debt and lack of growth still remains.” Well said. Next week will show if this “surprise” announcement has the depth to alleviate the uncertainty that have gripped global markets.

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Weekly StatSheet For The ETF/No Load Fund Tracker Newsletter – Updated Through 06/28/2012

Ulli ETF StatSheet Contact

ETF/Mutual Fund Data updated through Thursday, June 28, 2012

If you are not familiar with some of the terminology used, please see the Glossary of Terms.

 

1. DOMESTIC EQUITY MUTUAL FUNDS/ETFs: BUY — since 10/25/2011

The domestic TTI broke through its long-term trend line generating a Sell for this area effective 8/9/2011. Over the recent past, we’ve seen the TTI hovering slightly below and above this dividing line between bullish and bearish territory. The clear break to the upside occurred on 10/24/11 and, effective 10/25/11, a new Buy signal for domestic equities went into effect.

As of today, our Trend Tracking Index (TTI—green line in above chart) has broken above its long term trend line (red) by +1.64%. A break back below it will generate a Sell signal to move out of all domestic equity positions. Be sure to tune into my blog for the latest updates.

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US Equities Viagra Higher In Late Trading On EU Hope; XHS Rises, SLV Tumbles

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

US stocks closed with only small losses after speculations of a breakthrough in the ongoing EU summit in Brussels fueled a late-session recovery.

The rumor over a possible progress in negotiations grew stronger after Bloomberg reported German Chancellor Angela Merkel has cancelled her scheduled press conference on Thursday night, raising hopes that European leaders will announce meaningful resolutions to tide over the present sovereign debt crisis.

Sure, let’s wait and see until tomorrow to ascertain if Germany caved in EU negotiations as much as they did in their soccer game vs. Italy.

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