Navigating Your Portfolio Through the Election Nuttiness

Doug Fabian

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

Has there ever been a nuttier presidential election than this one?

Certainly not in my lifetime, and I’m not the only one who thinks so. A recent survey from the American Psychological Association (APA) reported that half of all respondents said the 2016 election is a major source of stress.

As quoted in a recent Bloomberg article, clinical psychologist Lynn Bufka, part of the APA’s Stress in America team, talked about the reasons for stress: “Historically, work, money and the economy are the top three… Now it’s [election] right up there.”

I know when I look at what’s going on around me, I get stressed. One big reason why is that I don’t think any of us really know what’s going to happen to stocks and the financial markets post-election.

Right now, the polls certainly favor Hillary Clinton. And as I’ve said before, I think the market wants a Clinton victory due to the “certainty” or “status quo” factor.

What the markets don’t want, however, is a Democratic sweep in both the House and Senate.

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Such a sweep would put Democrats in control of Congress and the White House, and that is something Wall Street does not want. Wall Street prefers gridlock and checks and balances. So, that’s yet another reason to stress this election year, especially if you’re someone charged with helping subscribers and clients achieve market-beating returns.

Yet amid the stress, there is one thing that for sure, and that is that markets will continue to trade. Moreover, it’s also true that once the stress of the election uncertainty passes, I think we are going to be staring down the barrel of one of the biggest buying opportunities we’ve seen in markets in some time.

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In fact, I think any pullback here (which we started to see this week) in sectors such as gold, silver, emerging markets and even the major domestic indices will likely translate into a very nice entry point for investors who remain patient and who see the possibilities in both the fundamentals and the charts.

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Some of my preferred future destinations for risk capital include gold, emerging markets and aerospace and defense stocks, to name just a few. These segments are all (and for a variety of reasons) setting up for nice buying opportunities once the election nuttiness has passed over.

Yet how will you know which sectors are ready for a buy, and which you should wait on?

Knowing how to buy the right funds at the right time is what my Successful ETF Investing advisory service has been doing for nearly four decades.

A subscription to Successful ETF Investing is your ticket to knowing what sectors are ready to be bought, and when those sectors should be sold. It also is as important to know what sectors you should stay away from, and which sectors just aren’t ready yet for any portfolio allocations.

If you want to get a jump start on your Q4 investing plan, then I invite you to check out Successful ETF Investing today!

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ETF Talk: Regional Fund Provides Access to Established Latin American Equities

The iShares S&P Latin America 40 ETF (NYSE: ILF) is a regional emerging-market exchange-traded fund (ETF) that marks a transition from our recent series on broad-based emerging-market funds.

A regional emerging market fund tracks the returns of companies within a specific region, such as Latin America. In contrast, a broad-based fund measures the returns of companies in a wide swath of emerging- market countries.

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ILF seeks to track the investment results of the S&P Latin America 40 TM Index, which is composed of 40 of the largest Latin American equities, based on their market capitalization. The fund invests at least 90% of its $990 million total assets in these securities.

Given the relatively larger market size of Brazil and Mexico, the fund has 45% and 35% of its assets in these two countries’ markets, respectively. The concentrated ratio of asset allocation means that the ILF is a non-diversified fund.

Furthermore, ILF has 30% of its assets in the financial sector and 25% in the consumer staples sector. Both of these sectors stand to profit from rising standards of living in the Latin America region.

Starting low at the beginning of the year, ILF has rebounded strongly with a year-to-date return of 36.62%, compared with the S&P 500’s year-to-date return of 6.98%. As the graph below shows, ILF did not achieve its high return without some major ups and downs — swings that are typical of a non-diversified emerging market fund. The fund has a dividend yield of 1.31% and an expense ratio of 0.49%.

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View the current price, volume, performance and top 10 holdings of ILF at ETFU.com.

Its top five holdings are the Itau Unibanco Holding SA ADR (ITUB), 8.92%; Bank Bradesco SA ADR (BBD), 6.94%; Ambev SA ADR (ABEV), 6.92%; Fomento Economico Mexicano (FEMSAUBD), 5.36%; and Petroleo Brasileiro SA Petrobras ADR (PBR.A), 5.09%. These top five holdings combined make up 33% of ILF’s total investments.

ILF provides investors with exposure to 40 large, established companies in Latin America in a single fund. However, as a regional, non-diversified fund. ILF is vulnerable to events that affect Latin America as a whole, as well as events that affect the financial and consumer staples sectors, which are its top two sectors. If you believe in the strength of Latin American economies and wish to gain easy access to the 40 largest Latin American stocks, I encourage you to look to iShares S&P Latin America 40 Index (NYSE: ILF) as a possible addition to your portfolio.

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As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

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Twain On Voting

“If voting made any difference they wouldn’t let us do it.”

— Mark Twain

One of my all-time favorites, the great Mark Twain often commented about the absurdity of politics and the nature of voting and the electoral process. I wonder what Twain would have thought about 2016?

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 readers, send it to me, along with any comments, questions and suggestions you have about my audio podcast, newsletters, seminars or anything else. Click here to ask Doug.

In case you missed it, I encourage you to read my e-letter column from last week about whether the time is ripe to dive into gold.

previous article

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