{"id":65241,"date":"2014-12-15T06:03:30","date_gmt":"2014-12-15T11:03:30","guid":{"rendered":"http:\/\/countingpips.com\/?p=65241"},"modified":"2014-12-15T07:37:38","modified_gmt":"2014-12-15T12:37:38","slug":"hot-etf-trends-to-avoid-in-2015","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2014\/12\/hot-etf-trends-to-avoid-in-2015\/","title":{"rendered":"Hot ETF Trends to Avoid in 2015"},"content":{"rendered":"
December 15, 2014<\/div>
\r\n<\/div><\/div>

By WallStreetDaily.com<\/span><\/a> \"The<\/p>\n

By Alan Gula<\/a>, Chief Income Analyst <\/em><\/p>\n

Though it may be hard to do, we need to shift our attention away from the twisted wreckage within the energy sector for a second.<\/p>\n

That\u2019s because, as 2014 winds to an end, investors need to make a plan for 2015. And in order to formulate a strategy, we need to reflect on the past year.<\/p>\n

Thus, I\u2019ve taken a look back to see where the \u201chot money\u201d was flowing. If we want to poach the investing herd in 2015, then we\u2019ll have to identify the most popular trades.<\/p>\n

Analyzing exchange-traded fund (ETF) flows is a great way to do this and can help us avoid overly crowded trades going forward.<\/p>

\r\n
\r\n

Free Reports:<\/p><\/div>\r\n

\r\n

<\/a>\r\n\t Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p>

\r\n
\r\n
\r\n

<\/a>\r\n\t Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p>

\r\n<\/div>\r\n

\r\n
<\/div>\n

Here are some of the hottest ETF trends in 2014:<\/p>\n

1. The Year of the S&P 500<\/h2>\n

It\u2019s certainly been a tough year for active managers, and the fund flows echo this difficult stock-picking environment.<\/p>\n

Year to date, three of the top seven ETFs with the largest fund inflows are S&P 500 Index tracking funds: the iShares Core S&P 500<\/strong> (IVV<\/a>), Vanguard S&P 500<\/strong> (VOO<\/a>), and SPDR S&P 500<\/strong> (SPY<\/a>).<\/p>\n

Cumulatively, inflows for these funds total nearly $26 billion this year, slightly lower than last year\u2019s $29 billion.<\/p>\n

2. Euro Hedged Equity Is All the Rage
\n<\/strong><\/h2>\n

Everyone hates the euro. So naturally, two of the fastest growing ETFs in 2014 provide exposure to European equities but hedge the exposure to the euro.<\/p>\n

Introduced in October 2013, the Deutsche X-trackers MSCI Europe Hedged Equity<\/strong> (DBEU<\/a>) grew rapidly in 2014, going from under $10 million in assets to nearly $700 million today.<\/p>\n

The WisdomTree Europe Hedged Equity ETF <\/strong>(HEDJ<\/a>) actually experienced the ninth-largest fund inflow of all ETFs in 2014, totaling $4.4 billion.<\/p>\n

The popularity of these euro-hedged funds is reminiscent of the gravitational pull of the WisdomTree Japan Hedged Equity Fund <\/strong>(DXJ<\/a>) in 2013. Year to date, the DXJ has slightly underperformed the S&P 500, but with dramatically larger drawdowns and higher volatility.<\/p>\n

3. REITs Getting Bloated<\/h2>\n

Real estate investment trusts (REITs) have been a very popular choice in 2014, as many investors are reaching for yield.<\/p>\n

The Vanguard REIT<\/strong> (VNQ<\/a>) has experienced the 10th<\/sup>-largest inflow of any ETF. Also, the Schwab U.S. REIT<\/strong> (SCHH<\/a>) saw strong inflows relative to its smaller size.<\/p>\n

As I\u2019ve said before, most of the largest REITs, which these ETFs will have the highest exposure to, are expensive.<\/p>\n

Here\u2019s a sector that you definitely want to go active with, since there are smaller REITs with cheap valuations<\/a>.<\/p>\n

4. Transports on Fire<\/h2>\n

Airlines, railroads, and shipping companies are big beneficiaries from cheaper oil, since gasoline, diesel, and jet fuel are major inputs for these transportation companies.<\/p>\n

However, the transport stocks were already making headway before the price of oil started to collapse this summer.<\/p>\n

The iShares Dow Jones Transportation Average ETF <\/strong>(IYT<\/a>) has seen over $1 billion in inflows this year.<\/p>\n

The SPDR S&P Transportation ETF<\/strong> (XTN<\/a>), which has a healthy 27% allocation to commercial airlines, is one of the fastest growing ETFs in 2014. Its assets have ballooned from around $70 million to over $500 million.<\/p>\n

This transports trade is quickly becoming a \u201cno lose\u201d proposition for investors\u2026 at least in their own minds.<\/p>\n

5. Peak MLPs<\/h2>\n

The iPath S&P MLP ETN<\/strong> (IMLP<\/a>) \u2013 although technically not an ETF \u2013 has displayed perhaps the second most impressive rise, after DBEU. Assets for IMLP have risen from around $50 million to upwards of $750 million.<\/p>\n

These inflows were surely ill-timed, but the master limited partnership (MLP) craze is a longer-term phenomenon.<\/p>\n

Fund assets for the JPMorgan Alerian MLP ETF<\/strong> (AMJ<\/a>), which was created in 2009, peaked at around $6.8 billion in September 2014.<\/p>\n

Naturally, with the price of oil cratering, someone has already yelled fire in this crowded theater.<\/p>\n

And as I showed earlier this week, many MLPs have questionable payout sustainability<\/a>.<\/p>\n

Bottom line: As long as there are markets, there will always be hot money flows.<\/p>\n

As we cautioned with the iShares iBoxx High Yield Corporate Bond ETF<\/strong> (HYG<\/a>) and the PowerShares Senior Loan Portfolio<\/strong> (BKLN<\/a>) earlier this year, significant and sustained fund inflows tend to indicate unfavorable risk-reward relationships.<\/p>\n

Safe (and high-yield) investing,<\/p>\n

Alan Gula, CFA<\/p>\n

The post Hot ETF Trends to Avoid in 2015<\/a> appeared first on Wall Street Daily<\/a>.
\nBy Alan Gula<\/a><\/p>\n

\n

<\/h3>\n

 <\/p>\n

 <\/p>\n

 <\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

By WallStreetDaily.com By Alan Gula, Chief Income Analyst Though it may be hard to do, we need to shift our attention away from the twisted wreckage within the energy sector for a second. That\u2019s because, as 2014 winds to an end, investors need to make a plan for 2015. And in order to formulate a […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-65241","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/65241","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=65241"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/65241\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=65241"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=65241"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=65241"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}