A Chilly Jobs Report Prompts Selling

By Jim Woods

A cold wind blew through the markets this morning, and it caused investors to once again head for the exits.

That cold wind was the chilly January jobs report, which showed the economy created just 151,000 new jobs in the month. That print was well below estimates that called for some 180,000 jobs.

While there was some good news in the report — the unemployment rate fell to 4.9% from 5%, and the workforce participation rate ticked higher — the headline number suggests the economy is getting weaker.

Fear of a weaker economy here at home is something that markets do not like, because it suggests that the global economic weakness has come to U.S. shores. It also suggests that Q1 earnings are going to continue to be pressured. Then when you combine that with pressure on energy and bank stocks from persistently low oil prices, you get a toxic bearish cocktail that could keep stocks in the doldrums for a lot longer.

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The one somewhat bullish aspect of the weaker jobs number is that there is very little chance that the Federal Reserve will pull the trigger on another interest rate hike in March. The markets know this, though, and stocks still sold off. This suggests a “dovish” Fed might not even have much influence on equities right now.

We’ll find out more from the Fed about what its intentions are when Chair Janet Yellen gives her Humphrey-Hawkins testimony to Congress next week. Right now, the Fed is still signaling that it intends to raise interest rates up to four times this year.

The problem with that plan is that the market now is pricing in about a 30% chance of zero rate hikes this year. This discrepancy between what the Fed is signaling and what the market expects could turn out to be big trouble for stocks, so it is not a big surprise to me that traders are taking bets off the table before the Yellen testimony.

For investors wondering how to navigate this market correction, your best plan is to play good defense. That’s what we’ve been advising subscribers to do in my Successful ETF Investing investment newsletter since early January — before the market meltdown really heated up.

If you want to find out how we knew to get out of stocks before the correction took place, then I invite you to check out Successful ETF Investing right now.

ETF Talk: Cyber Security Fund’s Pullback Gives It a Bargain Price

We continue our current series on the most promising exchange-traded funds (ETFs) this year for growth investors by featuring the relatively new and very much in vogue PureFunds ISE Cyber Security ETF (HACK). This fund is noteworthy in that it was the first one created to target the cybersecurity industry and the ETF is only slightly more than a year old.

This fund includes top cybersecurity firms and weights its holdings based on market cap to provide exposure to the industry’s biggest companies. The cybersecurity industry seems poised for a strong performance, as cyber-attacks around the world are growing at an alarming rate that shows no sign of slowing. For that reason, the products and services of the companies that are represented in HACK probably will be in more and more demand going forward.

Any time you hear about a big company having its cybersecurity compromised, that’s a sign that there is still more work for cybersecurity companies to do.

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

Despite this seemingly powerful trend, HACK has fallen 12.74% in the last 12 months. It has been tossed out along with most other growth-based investments lately, and it’s not clear that this really means the underlying companies are not good investments. And the ETF’s share price is up since its inception, and it could rise again in the coming months Assets managed for this fund clock in at about $775 million. It has an expense ratio of 0.75% and does not pay dividends.

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As you might expect, this ETF is very much focused on technology. The top holdings in its portfolio include the biggest cybersecurity companies on the market: Cyberark Software (CYBR), 4.80%; Symantec (SYMC), 4.37%; AVG Technologies (AVG), 4.36%; Trend Micro, 4.35%; and Check Point Software (CHKP), 4.22%. In addition, investing in this subsector through an ETF brings diversity that buying individual stocks lacks.

If the idea of investing in this hot and relatively new sector seems attractive to you, PureFunds ISE Cyber Security ETF (HACK) provides one of the best ways to do so.

Remember to look for the current price, volume, performance and top 10 holdings of HACK at ETFU.com.

If you want my advice about buying and selling specific ETFs, including appropriate exit points, please consider subscribing to my Successful ETF Investing newsletter.

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

The Best ETF Ideas for 2016

Over the past several weeks, we’ve covered what I think are the five best ETF ideas for 2016 for both growth investors, and income investors.

Here’s a quick review of all 10 ETFs on our list.

Growth ETFs

1) Health Care Select Sector SPDR Fund (XLV). Health care is an industry that continues benefitting from demographics, innovation, mergers and acquisitions (M&A) deals and insurance mandates. XLV is the ETF that holds the biggest and best health care stocks around.

2) First Trust Dorsey Wright Focus 5 ETF (FV). This is a “fund of funds” that simultaneously holds other funds that have allocations to top-performing sectors. Biotech, Internet, consumer staples, consumer discretionary and health care all are part of this fund.

3) PureFunds ISE Cyber Security ETF (HACK). This is the cyber security stock ETF, one that we’ve written about extensively in this publication, and in the Successful ETF Investing newsletter. We also recently conducted a FREE webinar on HACK, which I encourage you to check out before you start making investment decisions in 2016.

4) iShares India 50 ETF (INDY). India is a country that has a pro-capitalist political climate, a huge amount of human capital and citizens hungry for economic growth and an enhanced living standard. INDY is a way to get exposure to the companies benefitting the most from these trends.

5) WisdomTree Japan Hedged Equity Fund (DXJ). Japan continues to put the pedal to the metal on “Abenomics,” which means more quantitative easing from the Bank of Japan, and likely more upside for Japanese stocks. And, with DXJ’s hedge component you get that performance without the negative influence of any currency disparities.

Income ETFs

1) SPDR DoubleLine Total Return Tactical ETF (TOTL). This bond fund is actively managed by the “New Bond King,” Jeffrey Gundlach of DoubleLine Capital, and it takes advantage of the best bonds in the market. The fund invests across global fixed-income sectors, and with an eye toward shorter-duration bonds.

2) iShares US Preferred Stock (PFF). This fund gives you exposure to the best preferred stocks in the market. These hybrid securities are sort of like stocks, and sort of like bonds, as they tend to move higher with the equity markets while also delivering strong yields.

3) PowerShares CEF Income Composite ETF (PCEF). This ETF “fund of funds” gives you exposure to the closed-end fund market, a market that has consistently delivered outstanding yields for income-oriented investors.

4) iShares US Real Estate ETF (IYR). Real Estate Investment Trusts, or REITs, are a fantastic tool for generating yield, and in this fund of funds you get broad-based exposure to the best REITs operating in the market today.

5) iShares Select Dividend ETF (DVY). This is the best ETF for exposure to the biggest and arguably the best dividend-paying stocks in the market today. DVY gives you a very solid yield along with the upside potential of the broader equity markets.

If you want more ideas, including which funds we’re buying right now, then I invite you to check out my Successful ETF Investing newsletter today!

Gridiron Wisdom

“The measure of who we are is what we do with what we have.”

— Vince Lombardi

This weekend is Super Bowl 50, and it’s become a virtual holiday for many Americans. Today, I thought it would be appropriate to present a quote from the first Super-Bowl-winning coach, the great Vince Lombardi. Lombardi is a virtual quote machine, but today’s wisdom is one of my favorites. I like it because it reminds us that no matter what kind of start we had in life, or what our inherent talents might be, we owe it to ourselves to do the most we can with what we have.

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. Ask Doug.

In case you missed it, I encourage you to read my e-letter column from last week how global central bank movements provided a leg up for the market. I also invite you to comment in the space provided below my Eagle Daily Investor commentary.

All the best,
Doug Fabian
Doug Fabian

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