How the IMF Growth Forecast Impacts Investors

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.
A trader looks at a mixed financial picture

Global Growth Shakes up Investors

Global growth just ain’t what it used to be.

At least that’s the latest read from the International Monetary Fund (IMF). On Tuesday, the IMF lowered its global growth forecast for 2015, while also issuing a warning about the risks posed by increasing geopolitical tensions, as well as by an equity market trading at what it described as “frothy” levels.

The IMF now indicates the global economy will grow at a 3.8% pace next year, which is a downgrade from the July forecast for 4% growth. The bright spot in the global growth picture actually is U.S. economic growth, which the IMF added is helping lead a worldwide acceleration, albeit one that is expected to be slightly weaker than what was anticipated in July. The IMF said weakness in the euro zone, Brazil, Japan and Russia all are pulling down overall economic growth.

The announcement of a slowdown in global growth shouldn’t have come as a surprise to most, but traders used the announcement as a catalyst for some pretty aggressive selling. During the past several weeks, sellers have been in control, especially when it comes to emerging market and international equities.

The aggregate decline in the global equity market can be seen via a chart of the Vanguard Total World Stock ETF (VT).

VT_100814

Although the fund remains positive year to date by about 4.5%, VT shares are down more than 4% during the past month. The price action in September pushed VT down below its 50-day moving average, and last week the shares broke key support at the 200-day moving average.

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The decline in global markets is something we’ve been tracking in my Successful ETF Investing newsletter. Over the past month, subscribers have been instructed to reduce exposure to international equities, and we’ve exited several positions for gains before any real downside damage took place.

If you’d like to know how to protect your assets against more angst in the global equity market, then I urge you to check out Successful ETF Investing today.

Bogle on Mutual Fund Witchcraft

“The mutual fund industry has been built, in a sense, on witchcraft.”

–John C. Bogle, founder and CEO (retired), The Vanguard Group

John Bogle is the founder of The Vanguard Group, the company that’s the subject of today’s ETF Talk. Mr. Bogle is an outspoken critic of the status quo on Wall Street, and he shook things up in 1975 by creating Vanguard. He’s also known for some great pearls of wisdom, such as the criticism that the lack of transparency on the part of the mutual fund industry is akin to black magic.

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 the results of the third quarter and their impact on the future of the market. I also invite you to comment in the space provided below.

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The relentless slide in global stock markets continued this week. In U.S. stock markets, the Dow Jones was down 1.90%, the S&P 500 fell 1.89% and the NASDAQ slumped 2.41%. Global stock markets held up surprisingly well, with the MCSI Emerging Markets Index falling a mere 0.26%. Only two of your Alpha Investor Letter positions eked out gains this past week, with the iShares MSCI Frontier 100 (FM) gaining 0.55% and Markel Corp. (MKL) up 0.44%. A han

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