The Fed’s dovish comments in its latest FOMC meeting last Thursday added to the global slowdown concerns and increased volatility, triggering another wave of stock selling worldwide. This is especially true as both the S&P 500 and Dow Jones Industrial recorded losses in the four sessions out of the five since the meeting, plunging nearly 2.8% each during the same time period.
The Fed kept its interest rates unchanged citing a weak global economy, low inflation, falling commodity prices and instability in financial markets, though the U.S. economy is improving at a moderate pace. This suggests that cheap money flows will be in place for longer than expected and would increase the appetite for riskier assets. Investors should note that the near-zero rates have allowed the U.S. stock market to complete a spectacular six-year bull-run.
Additionally, the demand for high yield securities returned with the Fed’s unchanged policy while Treasury yields fell to the lowest level in one month. Further, the move has given a fresh lease life to the emerging market stocks (read: ETF Winners & Losers Post Dovish Fed Meet).
As a result, we have highlighted five hot ETFs that have seen respectable inflows following the Fed ‘no rates hike’ decision, as per the etf.com:
iShares MSCI Emerging Markets ETF ((EEM – ETF report))
It is the most popular and widely traded emerging market ETF with AUM of $22 billion and average daily volume of more than 55.3 million shares. The product topped the list of asset gatherers, having accumulated about $1 billion in assets in the past few trading sessions while charging 68 bps in fees per year from investors.
The fund tracks the MSCI Emerging Markets Index and holds 847 securities with each holding no more than 3.18% of assets. However, the product is tilted toward the financial sector at 28.5%, followed by information technology (18.1%). Among the emerging countries, China takes the top spot at 23.6% while South Korea and Taiwan round off the next two spots with double-digit exposure each. The fund shed 5.7% over the past five trading days and has a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook.
PowerShares QQQ ETF ((QQQ – ETF report))
This fund tracks the Nasdaq-100 Index, which measures the performance of the largest domestic and international non-financial companies listed on the Nasdaq Stock Market based on market capitalization. Holding 109 stocks, the fund is concentrated on the top firm – Apple (AAPL – Analyst Report) – at 13.2% while other firms hold less than 7.2% of assets. While information technology dominates the fund’s portfolio with 54.7% share, consumer discretionary and health care account for double-digit exposure each (read: Is iCar on its Way? Apple ETFs to Buy on Optimism).
QQQ sees inflows of over $565 million within a week following the Fed move and AUM totals $36.9 billion. It trades in average daily volume of more than 32.8 million shares and charges 20 bps in annual fees. The fund has lost 2.5% over the past five days and has a Zacks ETF Rank of 2 or ‘Buy’ rating with a Medium risk outlook.
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