A huge down month for stocks in January was followed by a big rebound in February, and now it's March, and the first two trading days of the month were reminiscent of the first two months. Equities got slammed on Monday after tensions flared up in the Ukraine. Then on Tuesday, the market rebounded mightily as those tensions were dialed down several notches.
The result of the action in the markets on Tuesday brought stocks back up to new all-time highs, with the S&P 500 closing at a record high of 1,873.91. The index now is way back above its 50-day moving average, a mark it fell below in mid-January. The broad measure of the domestic equity market remains firmly ensconced above the 200-day moving average.
The action in the domestic markets is similar to what has taken place in Europe, as the chart below of the iShares Europe (IEV) looks almost like a carbon copy of the S&P 500, particularly over the past six months.
It is an entirely different story, however, in the emerging markets, where stocks in the iShares MSCI Emerging Markets (EEM) remain under pressure and below their 50- and 200-day moving averages.
The situation is similar for stocks in the bellwether Chinese market, as the chart below of the iShares FTSE China 25 Index (FXI) clearly reveals. The measure of the biggest stocks traded on the Shanghai Exchange also trades below its 50- and 200-day moving averages.
The big question occupying the minds of those of us who make investment calls for a living is what is going to happen from here?
Will this market remain volatile like it has been in the first two months of the year, or will things settle down and resume a more pronounced trend in either direction? Will the market calm and trade more in step with real fundamentals, or will the fast-money funds continue to dominate the trading landscape?
All of these are great questions, and there is no easy or obvious answer to any of them. And though we don't know what's next for the markets, we do know that if you are prepared to take advantage of the trends the market gives you, you will be in a great position to profit regardless of the circumstances.
ETF Talk: WisdomTree Grows Portfolios with Dividends
By Doug Fabian
We continue our examination of various exchange-traded fund (ETF) providers today by taking a look at WisdomTree. WisdomTree entered the ETF market in 2006 and is currently the fifth-largest provider of ETFs, with 62 funds.
WisdomTree's unique value to investors is that it offers an alternative method for weighting its funds. Many ETFs follow a market-capitalization strategy, i.e. the proportion that a fund holds of its various equities reflects the ratio of those equities to each other in the stock market.
Instead of weighting its investments that way, WisdomTree looks at fundamentals in constructing its funds. WisdomTree offers two proprietary weighting systems: the Earning Stream method and the Dividend stream method. The company's analysts have taken note, as have we, that higher and more consistent dividends are an objective indication of companies that give higher returns.
One such fund is the WisdomTree Europe SmallCap Dividend Fund (DFE). This fund has managed to retain value in the first two tumultuous months of 2014, with a year-to-date return of 0.22%. Last year's performance featured a market-beating 40.85% return. For investors interested in additional income, the current yield is 2.39%.
In addition to equity ETFs, WisdomTree features alternative investments and currency ETFs, offering global diversity for your portfolio.
If you're interested in investing with a focus on fundamentals, as opposed to the tumultuous fashions of stock prices, WisdomTree offers you that chance in the transparent and economical form of ETFs.
If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful Investing newsletter. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an e-mail. You just may see your question answered in a future ETF Talk.
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