U.S. markets experienced a double dose of good news this week. First, the Federal Reserve exited the third iteration of its quantitative easing program. The program has been both hated and loved for various reasons, but the overall net impact is negative for the economy. Interest rates near zero are generally not a good thing for an economy. The argument in favor of maintaining such low rates is the economy would be far worse without them. Rising interest rates induce more risk taking, not less, because lenders and investors can earn positive returns. Additionally, savers, especially retirees, will be able to earn a decent return as rates again move higher.

The second piece of good news was the stronger than expected GDP report for the third quarter. The advance estimate came in at 3.5 percent, slightly ahead of expectations in the low 3 percent range. Part of the spike was driven by defense spending, due to the campaign against ISIS. More important than the stronger GDP number is the Federal Reserve’s comments on hiring and other positive signs they’re seeing in the economy. The Fed sees raw data as it comes in, weeks ahead of when it is made public. If they’re still seeing strength, the upturn in the economy may finally have legs after 6 years of unease.

On the risk side, the Bank of Japan (BOJ) shocked global markets when it announced an increase in its quantitative easing program. The yen promptly sold off, breaking through a key support level, while the Nikkei shot up to a new multi-year high, also breaking through a key resistance level. Gold was hit hard in the wake of the news. One of the explanations for the drop in gold in 2013 was Japan’s aggressive monetary policy. At least for today, it appears that explanation was correct.

The BOJ’s decision isn’t all good news. The yen is a key trade currency because Japan competes with other Asian export powers, both for customers and is a major outsourcer in Asia. The markets are very happy about Japan’s decision today, but if the yen continues to weaken in the months ahead and takes down other currencies with it, this could turn into an Asian and/or emerging markets currency crisis. Traders started selling the Chinese yuan on Friday in response to the BOJ’s move, a possible foreshadowing of trouble down the road.

On the bright side, we moved into the WisdomTree Japan Hedged Equity Fund (DXJ) recently in the ETF Investor Guide as we anticipated a breakout. The fund is up more than 6 percent today, capturing the Nikkei’s gain and hedging away the currency losses. If Japan’s currency continues to devalue, Japanese and foreign investors will dump their yen for stocks and other assets, which is the scenario in which DXJ shines.

Domestically, major indexes are back at or near record highs due to the Fed, GDP report, strong earnings and BOJ decision. Following strong gains on Tuesday and Thursday, the S&P 500 Index pushed back to its all-time highs. The Dow Jones Industrial Average has been a laggard all year, but a strong earnings report from Visa (V) this week helped goose the index’s return and send it to a new all-time high on Friday. The Nasdaq pushed to new highs for the year, while the Russell 2000 saw its second strong week in a row. It is still in a downtrend for the year though, requiring a small gain to push above September’s high and then another 3 percent in order to make a new high for the year.

Global X SuperDividend ETF: High Yield With Risk

A Seeking Alpha Contribution

Summary

• SDIV offers a global portfolio of high yield securities and currently yields more than 6%.
• SDIV invests heavily in sectors such as utilities and telecom, as well as REITs and mortgage REITs.
• Although SDIV is not a high risk fund, it does have significant interest rate and currency risk.

Global X SuperDividend ETF is a three year-old fund that sweeps the globe for high yield stocks. The result is a portfolio with a high dividend yield, but it comes with higher volatility than the average global fund.

Index & Strategy

SDIV tracks the Solactive Global SuperDividend Index. The index tracks the 100 highest yielding companies who can pass the index’s dividend outlook screen. Other basic criteria such as a $500 million market cap and $1 million average daily volume also trims the list of potential holdings. Foreign withholding taxes are counted against a stock when assessing its yield, which tilts the field toward lower tax countries and domestic shares in the U.S.

The holdings are weighted equally and checked for sustainability quarterly, but otherwise the fund is rebalanced annually… To Continue Reading, Please Click Here.

*Please note, this article was written and published as a contribution for Seeking Alpha. To finish reading the article you will be redirected to their site.

First Trust Value Line Dividend ETF Plays It Safe

A Seeking Alpha Contribution

First Trust Value Line Dividend ETF (NYSEARCA:FVD) is the oldest dividend ETF in existence, created in August 2003. The fund has found favor with investors; it has nearly $1 billion in assets. Still, in a market that often sees first movers come to dominate their market niche, FVD has been passed in assets by newer offerings from iShares, Vanguard and Schwab.

Index & Strategy

FVD is using Value Line Safety Rankings in order to narrow the field of potential holdings. It starts with U.S. listed companies that have a #1 or #2 ranking according to Value Line. The Safety Rank “is derived from a stock’s Price Stability index and the Financial Strength rating of a company…high Safety ranks are often associated with large, financially sound companies; these same companies also often have somewhat less-than-average growth prospects because their primary markets tend to be growing slowly or not at all.” To Continue Reading Please Click Here.

*Please note, this article was written and published as a contribution for Seeking Alpha. To finish reading the article you will be redirected to their site.