Why You Should Pay Attention to Non-Correlated Assets

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

Bond Yields Drop While Non-Correlated Assets Soar

When a major benchmark in the market falls to near-historic lows, you had better pay attention. That’s certainly what’s happened with long-term interest rates, i.e. the yield on the benchmark 10-year Treasury Note.

The chart below of $TNX shows the rapid decline in bond yields since July, a decline that continues today.

Now, there are many reasons for the decline in bond yields and the subsequent rise in bond prices (remember that bond yields move the inverse of bond prices), and this situation tells us a lot about what’s happening in the world right now.

TNX_081314

There’s a lot of geopolitical uncertainty around the globe. Violence in Gaza, Ukraine and Iraq are the three serious hot spots right now, and that’s got traders more than just a little nervous. Perhaps more importantly, we have the rocky European economy, which has slowed down quite a bit of late. If Europe’s economy starts to get significantly weaker, it could mean an even bigger flight to quality in long-term bonds and an ever further decline in bond yields.

During periods of rising bond yields and faltering U.S. equity prices such as we’ve seen since late July, it behooves us to look into what are called “non-correlated” asset classes. These are asset classes that tend not to move along with the wider U.S. stock market.

Assets such as gold and silver are considered traditional non-correlated investments, but the other non-correlated asset class I like is China. Stocks that trade on the Chinese stock market as “A-shares” generally do not track the movement of U.S. equities. During periods like we’ve seen in the past several weeks, and also throughout July, Chinese stocks handily outperformed the U.S. stock market.

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In the previous two weeks of Weekly ETF Report, I expounded more on some other non-correlated markets, as well as ways to play the non-correlated China market. Take a look at those now.

Lombardi on Success

“The only place success comes before work is in the dictionary.”
–Vince Lombardi

We all want success in business, investing, family, etc. Yet I’ve found that most people aren’t willing to do what it takes to achieve that success. If you aren’t satisfied with your level of achievement, and you want greater success, then try working a little harder, and a little smarter. Sure, it might not feel that great putting in those extra hours or making that little extra effort, but the results will feel fantastic.

Wisdom about money, investing and life can be found anywhere. If you have a good quote you’d like me to share with your fellow Weekly ETF Report readers, send it to me, along with any comments, questions and suggestions you have about my audio podcast, newsletters, seminars or anything else. Ask Doug.

In case you missed it, I encourage you to read my e-letter column from last week about July’s top 10 ETFs. I also invite you to comment in the space provided below.

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There is a group of Arab countries that are attracting investors’ attention because they are among the fastest growing and most successful economies in the world.

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