3 ETFs To Watch This Week
The deadlock in Washington is starting to impact financial markets.
The one-two punch of the government shutdown and the upcoming debt ceiling has investors wondering what the market will do next.
Here are three ETFs to keep an eye on this week…
PowerShares DB US Dollar Index Bullish (UUP)
UUP is composed solely of long USDX futures contracts. It’s designed to replicate the performance of being long the US Dollar versus the Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona, and Swiss Franc.
The US Dollar has been falling in value since July. The weakness in the greenback accelerated to the downside when the Fed delayed the taper. And UUP hit its lowest level since November 2011when the government shut down last week.
Needless to say, the ongoing Fed stimulus program, government shutdown, slowing US economic growth, and the potential default on US debt aren’t good for the Dollar.
As a result, investors are moving money out of US Dollars and into other safe haven currencies like the Swiss Franc and Japanese Yen.
The exodus out of the US Dollar will likely accelerate if a deal to raise the debt ceiling isn’t reached soon. However, if politicians reach a last minute deal to stave off a default (like they always have before), investing in UUP now could have a quick rebound in the weeks ahead.
United State Oil Fund (USO)
USO tracks the changes in price of WTIC crude oil.
The price of the US crude oil benchmark has fallen 8.2% from a high of $112.24 on August 28th to around $103 today. As expected, USO has fallen in lockstep with WTIC oil prices.
The price of oil is falling as economists start to trim their 4th quarter US GDP estimates because of the government shutdown and the fear of the US defaulting on debt payments.
What’s more, WTIC oil prices were falling even though tropical storm Karen had forced the shutdown of oil production in the Gulf of Mexico. The closures had cut production by 62% or 866,000 barrels per day.
At this point, investors are being forced to believe the idiots in Washington are actually stupid enough to not raise the debt limit and drive our economy off a cliff.
As the President said, there would be “catastrophic consequences” if Congress fails to raise the debt ceiling. And one of those would surely be a big drop in oil prices and USO.
SPDR S&P 500 (SPY)
Last but not least is SPY. It tracks an index of 500 large cap US stocks.
US stocks are holding up well in light of the shenanigans in Washington. SPY is a mere 2.75% below its all-time high of $172.76.
The majority of Wall Street big wigs believe there is a “zero percent” chance of a US credit default. Even Warren Buffett believes Congress will go right up to the point of “extreme idiocy” but won’t cross it.
It’s not surprising to see SPY holding up well with so many big market players convinced that Washington will eventually do the right thing. And for good reason…
On previous run-ins with government shutdowns and debt ceilings, SPY has soared to the upside when the crisis was averted. When the government shutdown in 1995-1996 came to an end, stocks jumped 10.5% in the following month.
I know I don’t want to miss out on the upside.
Here’s the bottom line…
The game of Russian roulette Washington is playing with our economy is just plain stupid. But that’s just how this generation of stupid politicians operates.
In the end, the crisis will be avoided and investors that avoided selling out of fear will be rewarded with solid gains into the end of the year.
Good Investing,
Corey Williams
Category: Commodity ETFs, Currency ETFs, ETFs, What's Going On?
