SPECIAL REPORT: The Best Fidelity Fund to Buy Before 2015 With the risk of higher interest rates becoming reality in 2015, investors looking for high income face a tough set […]
A Seeking Alpha Contribution
There are two more ETFs to cover on the domestic side. The first is the First Trust S&P REIT Index ETF (NYSEARCA:FRI). This one of the smaller REIT ETFs on the market, but has amassed nearly $300 million since inception in 2007.
FRI tracks the S&P United States REIT Index. The index covers U.S. REIT shares, including some specialty REITs such as prisons, but holds no timber REITs. Due to criteria that the companies own properties, the index also excludes mortgage REITs. The holdings are weighted by market cap. The holdings and the weightings in FRI are most similar to those of the Vanguard REIT Index ETF (NYSEARCA:VNQ), which tracks the MSCI US REIT Index.
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The Russell 2000 Index will try to finish 2014 at a new all-time high following nearly a year of sideways trading. The small cap index peaked in spring 2014 but was unable to find support allowing it to follow the rally in large-caps. A push in the final days of 2014 is possible given mid-caps climbed to a new 52-week high last week. While mid-cap stocks had under-performed in 2014, they have turned higher and started closing the gap with large-caps. If they don’t turn up this week, we will likely see small-caps play catch up in early 2015.
Domestic stocks have the wind at their back following last week’s revision of GDP up to 5.0 percent growth. A rise in healthcare spending driven by the Affordable Care Act led to the surprise number, which was well above even the optimistic 4 percent growth forecasts. Although the boost in healthcare spending is good news for the sector, it may fail to be the best performing sector this year, hurt by last week’s dip in biotechnology. Instead, utilities are on track to be the best performing sector to close the year. The S&P 500 utilities sector is up 27.90 percent this year, ahead of the 24.71 percent return for the healthcare sector.
Aside from strong economic growth reported last week, American stocks and bonds may benefit from turmoil in Europe after Greece’s ruling party failed to elect a new president. A general election will be held at the end of January following the third round of presidential voting, in which New Democracy leader Antonis Samaras failed to secure the 180 votes needed for victory. The latest polls show the anti-austerity Syriza party with a 6 percent lead on New Democracy. This weekend, Germany’s finance minister warned Greece that it will be expected to adhere to international agreements, no matter who wins. In the past, Syriza leader Alexis Tsipras has said he would abandon austerity.
The immediate result of the failed presidential vote was a more than 10 percent drop in Greek equities, though losses were curtailed by the end of the trading day. Greek bond yields jumped while yields on northern European sovereign debt sank as investors moved to safety. The two-year German bond yield fell to negative 10 percent and the 10 year yield dipped to 0.56 percent. It remains to be seen if this is a trend or an overreaction by investors, but the shift in European assets is positive for the U.S. dollar and assets prices this week.
Global markets will be closed on Thursday for New Year’s Day. Some countries also have a holiday on Wednesday or Friday. December purchasing managers’ indexes will be out on Friday. Few companies will report earnings during this holiday shortened week.
Greece is back in the headlines. The ruling party has called a snap election for president, but if the party fails to elect its candidate, it will trigger parliamentary elections at the end of January that could hand power to the anti-austerity opposition.
The Greek debt crisis is an economic crisis, but it is also a political crisis. After five years, the Greece debt crisis is unresolved because there is no broad consensus between the political leadership in Europe and the voters of Europe on how to deal with the debt problem. Within Greece, there is a disagreement over austerity. In the wider European Union, a similar split exists. Many voters, such as those in Germany, oppose bailouts for Greece, while European leadership has mostly favored them…. To Continue Reading Please, Click Here.
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Click here to view the Global Momentum Guide for December 29, 2014 Weekly Sector Perspective The Santa Claus rally arrived on schedule last week, lifting the major indexes to new all-time highs. […]
