Dollar And Presidential Cycles Lining Up For A Rally

A Seeking Alpha Contribution

Conditions are favorable for a strong U.S. stock market performance in the fourth quarter of 2014 and into first half of 2015 once the current corrective selling has abated.

U.S. Dollar

The first factor working in the favor of stocks is the U.S. Dollar Index (DXY). The major rally in the U.S. dollar since July has been historic, the first ever 12-week win streak for the U.S. Dollar Index in its entire history. While a stronger U.S. dollar has been bad for stocks during its rapid ascent, the move appears exhausted and there’s a historic parallel with the early 1997 U.S. dollar rally.

In fact, the parallels go much further, since the U.S. Dollar Index from 2002 to 2014 has behaved very similarly to the U.S. Dollar Index from 1985 to 1997, including the recent three-month rally…. 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.

Major indexes moved lower this week on concerns about global growth. For much of the year we have been warning about the risk of a slowdown in China. The slowdown there is pronounced and it has been steadily getting worse all year. True to form, even though the U.S. economy remains in good shape, investors ignored the growing problems overseas and now making a belated reassessment of risk across all asset classes, regardless if they deserve it or not.

The areas most at risk from China’s slowdown bore the brunt of selling over recent weeks. Lower demand for commodities impacts markets from Australia to Brazil, while emerging markets and China’s economy are closely linked. It doesn’t help that both Japan and Europe’s economies remain stagnant, either in recession or on the edge of one.

On the bright side, the selling appears to be nearly finished, with many sectors and indexes oversold. Commodities have been among the hardest hit, with some subsectors down 30 percent or more since July, with the bulk of the losses coming since September. Energy has been among the worst performing assets over the past two months.

The German DAX Index broke its major support line on Friday, something it had held all year. The CAC 40 in France and the FTSE in the UK were also trading at new lows during Friday’s session. In total, the picture overseas is far worse than it is domestically. Large cap U.S. stocks remain in a long-term uptrend, while foreign markets toy with potential bear markets.

The Russell 2000 Index broke to new lows for the year as investors continue to favor large caps. It remains the one main point of weakness domestically, with the index back to levels seen one year ago. In contrast, the S&P 500 Index is trading at levels seen in June. Large cap stocks are the vast majority of market capitalization and until the domestic large cap indexes crack, odds are stocks will see a rebound over the coming weeks.

Stagnant Income Weighs On The SPDR Dividend ETF

A Seeking Alpha Contribution

Dividend ETFs are more popular than ever, thanks to the central banks of the world giving us zero interest rate policies (ZIRP), but the word “dividend” in an ETF means different things in different funds. Some funds target very high-yields, such as the Global X Super Dividend ETF (NYSEARCA:SDIV), but others such as the Vanguard Dividend Appreciation ETF (NYSEARCA:VIG) aim for growth, while WidsomTree has an entire line-up of ETFs that use dividends as a selection factor in their indexes. Most investors are probably looking for rising dividends and assume that most common stock dividend ETFs provide it – but that is an incorrect assumption.

SPDR Dividend ETF (NYSEARCA:SDY) is the third-largest dividend ETF, the last of the three currently above $10 billion in assets, and also one of the oldest, launched in 2005….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.