Gain From the Greenback’s Pain Through ETF’s
If you’re bullish on stocks, you should be shopping abroad.
THE DOLLAR CONTINUES to be yin to the stock market’s yang.
As the perception that the worst of the economic and financial crisis has passed bolsters equities, the greenback is giving back its gains.
The Euro’s Demise Has Been Set in Motion: Are you protected?
"Nationalism will emerge. Healthier countries will not see fit to spend their hard earned money to bail out their less responsible neighbors."
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The dollar’s declines are being blamed by the sado-monetarists (to steal once again a terrific turn of phrase from John Liscio, our late friend and colleague at Barron’s) on the aggressive expansion of liquidity by the Federal Reserve.
And, indeed, the U.S. Dollar Index, which measures the greenback’s value against a basket of America’s major trading partners, broke below its 200-day moving a couple of weeks ago (“Green Shoots — Bad for Greenbacks,” May 7.) The further drop in the U.S. Dollar Index to below 82 essentially puts it back to where it started the year……
……For broad exposure to the market from the Great White North, there’s the iShares MSCI Canada Index exchange-traded fund (EWC.) Banks comprise a hefty share of the index, however, with Research in Motion (RIMM) also having a significant weight along with miners and commodity-related stocks.
Similarly, if you’re bullish on materials stocks, you ought to be considering Brazilian materials stocks, which will give an added currency kicker. As noted here, China is now Brazil’s largest trading partner, displacing the U.S., and the two countries are working on a plan to conduct a trade in their own currencies and cut the dollar out of the deal (“New Dilemma for the Dollar,” May 19.) The iShares MSCI Brazil ETF (EWZ) gives a broad exposure to that country’s market.
If you like industrials, the ISI Group team suggests South Korean industrial stocks. South Korean industrial stocks provide a leveraged play on the S&P 500 and global trade while the won would benefit from a recovery in world trade. The iShares MSCI South Korea Index ETF (EWY) provides a broad play on that country’s market.
For metals and mining stocks, Australian issues are an obvious choice. As with Canada, the crisis and the resulting flight to quality sent the Aussie dollar reeling last year. A rebound in the currency would add to the potential gains in the stocks. The iShares MSCI Australia Index ETF (EWA) gives a quick way to participate in stocks Down Under. While BHP Billiton (BHP) is the largest holding, banks and other financials comprise a hefty portion of the index.
Full Story: http://online.barrons.com/article/SB124285469500340755.html
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