New Year, Big Volatility
If the first six trading days of 2015 are any harbinger of what’s to come for the entire year, then strap on your seatbelts and get ready for an “A-ticket” rollercoaster ride.
Since the start of the year, there has been BIG volatility in the equity markets, as stocks are getting pulled down and then pushed back up by conflicted traders trying to make sense of it all.
Now, for the past several weeks I’ve been telling my podcast listeners that 2015 is going to be much different than 2014. I suspect that we’ll see much more volatility this year, and things have certainly started out that way.
Forces such as a rising U.S. dollar and plunging oil prices (see accompanying charts), as well as ultra-low bond yields and the omnipresent uncertainty about when the Federal Reserve will start to raise interest rates, have contributed to the push-pull that we’ve seen this year and that we are likely to keep seeing for at least the first half of 2015.
My advice to investors right now is to make sure you have plenty of cash on the sidelines in case this market volatility morphs into a markedly across-the-board decline.
If that doesn’t happen, and if stocks shrug off the negatives of falling oil prices, then you can always put that cash to work in targeted exchange-traded funds (ETFs) offering the best risk-reward proposition.
Top 10 Domestic, Top 10 International Dividend ETFs
One of the bright spots of the past several years for yield-hungry investors has been dividend-oriented ETFs. Both domestic and international dividend ETFs offer the prospect of attractive yields along with solid share-price appreciation. But in 2014, it was domestic ETFs that trounced their international brethren in terms of total return.
The two tables below offer a stark contrast between the recent performance of the top 10 domestic income ETFs and the top 10 international dividend ETFs.
| Ticker | Name | 3MO% | 2014% | Yield% (12M) |
|---|---|---|---|---|
| RDIV | RevenueShares Ultra Dividend | 7.37 | 17.21 | 3.36 |
| PEY | PowerShares HighYield Dividend Achievers | 8.43 | 13.92 | 3.24 |
| FVD | First Trust Value Line Dividend Fund | 7.56 | 12.89 | 2.46 |
| DON | WisdomTree Midcap Dividend Fund | 6.98 | 12.23 | 2.56 |
| TDIV | FT Nasdaq Tech Dividend Index Fund | 2.21 | 12.20 | 2.80 |
| DHS | WisdomTree High-Yielding Equity Fund | 3.84 | 11.72 | 2.91 |
| DTN | WisdomTree Dividend Top 100 Fund | 4.50 | 11.53 | 3.07 |
| DLN | WisdomTree Large Cap Dividend Fund | 4.20 | 11.45 | 2.34 |
| DTD | WisdomTree Total Dividend Fund | 4.71 | 11.37 | 2.42 |
| DVY | iShares Dow Jones Select Dividend Index | 7.50 | 11.28 | 3.03 |
| Ticker | Name | 3MO% | 2014% | Yield% (12M) |
|---|---|---|---|---|
| GULF | WisdomTree Middle East Dividend | -15.41 | 2.10 | 4.85 |
| AXJL | WisdomTree Asia-Pacific EX-J | -2.32 | (1.82) | 3.59 |
| PID | PowerShares International Dividend Achievers | -5.40 | (4.94) | 3.92 |
| FDD | First Trust DJ STOXX Select Dividend 30 | -3.40 | (5.57) | 4.30 |
| DIM | WisdomTree International MidCap Div | -1.64 | (5.95) | 3.46 |
| FGD | First Trust DJ Global Select Dividend | -4.66 | (6.35) | 5.18 |
| DGS | WisdomTree Emerging Markets Small Cap Div | -6.62 | (6.36) | 3.20 |
| DVYA | iShares Asia Pacific Dividend 30 Index Fund | -4.25 | (8.12) | 5.28 |
| DEW | WisdomTree Europe High-Yield Fund | -5.22 | (8.17) | 5.00 |
| IQDE | FlexShares-Int Qual Dividend Defensive | -6.01 | (8.30) | 4.02 |
Here we see that all of the domestic funds were firmly in the black last year, and all had double-digit-plus percentage gains. Meanwhile, all but one of the top international dividend funds finished in negative territory.
Even though international dividend ETFs offer higher yields than their domestic counterparts, there is no doubt that in 2014 the juice was definitely with domestic dividend ETFs.
But, will 2015 see more of the same, or will this be the year when money returns to international equities? While nobody knows this answer for certain, what I do think is that at least from a value and bargain perspective, international dividend ETFs look a lot more tempting to buy.
Rushdie on Freedom
“Religion, a medieval form of unreason, when combined with modern weaponry becomes a real threat to our freedoms…”
–Salman Rushdie
This week’s heinous events in Paris remind us that religious extremism mixed with violence is a toxic cocktail that threatens the entire free world. Writer Salman Rushdie has known this ever since the Ayatollah Khomeini put a price on his head for penning a novel. Now, French satirical journalists are the latest victims of this disgraceful extremist attempt to silence free speech. Let’s not let this happen here at home. It’s up to all of us to stand up for freedom and free speech, and against religious extremism intent on imposing its will on America. Je suis Charlie!
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 top 10 ways to be a better ETF investor in 2015. I also invite you to comment in the space provided below.
