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With the surge in global stock market, the greenback witnessed a sharp decline given that the U.S. Dollar Index has fallen 1.7% over the past month. This is because the optimism over the COVID-19 vaccine will end the pandemic-ravaged economic damage and lead to a swift global recovery, thereby dimming the lure of dollar as a safe haven (read: 7 Leveraged ETFs of November With Spectacular Returns).
Additionally, U.S. President-elect Joe Biden’s administration with a potential divided Congress is favorable for the economy, thereby bolstering investors’ confidence in the stock market. Further, trillions of cheap money flowing into the economy has also pushed the dollar down. The resumption of talks between U.S. Treasury Secretary Steve Mnuchin and House of Representatives Speaker Nancy Pelosi about a stimulus package is weighing on the greenback.
Weak Dollar: A Boon
A weak dollar has befitted the blue chip companies, which derive most of their revenues from international markets. This is because a weak dollar has made dollar-denominated assets cheap for foreign investors, making U.S. multinationals more competitive, thereby leading to increased profits. As such, companies having a higher percentage of international sales may outperform. Moreover, commodities, emerging markets, as well as metal producers are also getting a lift from a weak dollar.
Given this, we have highlighted ETFs from each of these zones that are benefiting from the current trend and are likely to do as long as the dollar remains weak.
With AUM of $9.7 billion, this ETF offers diversified exposure to the largest growth stocks in the U.S. market by tracking the CRSP US Mega Cap Growth Index. It holds 100 securities in its basket with none accounting for more than 12.6% of total assets. Information technology takes the largest share at 48.5% while consumer discretionary takes 24.4% of assets. The ETF charges 7 bps in annual fees and trades in good volume of around 362,000 shares a day on average. The fund has gained 9% over the past month and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read: 5 Sector ETFs That Beat the Market in November).
Invesco DB Commodity Index Tracking Fund (DBC - Free Report)
This fund tracks the DBIQ Optimum Yield Diversified Commodity Index Excess Return, which delivers returns through futures contracts on 14 of the most heavily traded and important physical commodities in the world. The fund charges 88 bps in annual fees while trades in a solid volume of 1.2 million shares per day. The product has managed assets of $1.1 billion and has gained 7.2% in a month.
This ETF follows the MSCI Emerging Markets Investable Market Index, offering exposure to a broad range of emerging market companies. It holds 2,559 stocks with each accounting for less than 6% of assets. The product has key holdings in information technology, consumer discretionary, financials and communications. Among the emerging countries, China takes the top spot at more than 37% share while Taiwan and South Korea round off the next two spots. The fund has AUM of $61.5 billion and trades in an average daily volume of around 13 million shares. It charges 13 bps in fees per year from investors and has soared 9.7% in a month. The fund has a Zacks ETF Rank #3 with a Medium risk outlook.
This ETF offers global access to a broad range of copper mining companies. It tracks the Solactive Global Copper Miners Total Return Index and holds 30 stocks in its basket with none making up for more than 5.7% share. Canadian firms take the largest share at 34.9% while United States and Britain round off the next two spots. The product has managed $153 million in its asset base while charging investors 65 bps in fees per year. It has soared 22.3% over the past month (read: Copper Miners ETF Hits New 52-Week High).
This fund tracks the DBIQ Optimum Yield Industrial Metals Index Excess Return, which is a rules-based index composed of futures contracts on some of the most liquid and widely used base metals - aluminum, zinc and copper (grade A). It has amassed $166.4 million in its asset base while trades in an average daily volume of 83,000 shares. DBB charges 84 bps in annual fees and has gained 10.6% in a month. It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Bet Big on Industrial Metal ETFs on Vaccine Optimism).
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5 ETFs to Buy on a Weak Dollar
With the surge in global stock market, the greenback witnessed a sharp decline given that the U.S. Dollar Index has fallen 1.7% over the past month. This is because the optimism over the COVID-19 vaccine will end the pandemic-ravaged economic damage and lead to a swift global recovery, thereby dimming the lure of dollar as a safe haven (read: 7 Leveraged ETFs of November With Spectacular Returns).
Additionally, U.S. President-elect Joe Biden’s administration with a potential divided Congress is favorable for the economy, thereby bolstering investors’ confidence in the stock market. Further, trillions of cheap money flowing into the economy has also pushed the dollar down. The resumption of talks between U.S. Treasury Secretary Steve Mnuchin and House of Representatives Speaker Nancy Pelosi about a stimulus package is weighing on the greenback.
Weak Dollar: A Boon
A weak dollar has befitted the blue chip companies, which derive most of their revenues from international markets. This is because a weak dollar has made dollar-denominated assets cheap for foreign investors, making U.S. multinationals more competitive, thereby leading to increased profits. As such, companies having a higher percentage of international sales may outperform. Moreover, commodities, emerging markets, as well as metal producers are also getting a lift from a weak dollar.
Given this, we have highlighted ETFs from each of these zones that are benefiting from the current trend and are likely to do as long as the dollar remains weak.
Vanguard Mega Cap Growth ETF (MGK - Free Report)
With AUM of $9.7 billion, this ETF offers diversified exposure to the largest growth stocks in the U.S. market by tracking the CRSP US Mega Cap Growth Index. It holds 100 securities in its basket with none accounting for more than 12.6% of total assets. Information technology takes the largest share at 48.5% while consumer discretionary takes 24.4% of assets. The ETF charges 7 bps in annual fees and trades in good volume of around 362,000 shares a day on average. The fund has gained 9% over the past month and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read: 5 Sector ETFs That Beat the Market in November).
Invesco DB Commodity Index Tracking Fund (DBC - Free Report)
This fund tracks the DBIQ Optimum Yield Diversified Commodity Index Excess Return, which delivers returns through futures contracts on 14 of the most heavily traded and important physical commodities in the world. The fund charges 88 bps in annual fees while trades in a solid volume of 1.2 million shares per day. The product has managed assets of $1.1 billion and has gained 7.2% in a month.
iShares Core MSCI Emerging Markets ETF (IEMG - Free Report)
This ETF follows the MSCI Emerging Markets Investable Market Index, offering exposure to a broad range of emerging market companies. It holds 2,559 stocks with each accounting for less than 6% of assets. The product has key holdings in information technology, consumer discretionary, financials and communications. Among the emerging countries, China takes the top spot at more than 37% share while Taiwan and South Korea round off the next two spots. The fund has AUM of $61.5 billion and trades in an average daily volume of around 13 million shares. It charges 13 bps in fees per year from investors and has soared 9.7% in a month. The fund has a Zacks ETF Rank #3 with a Medium risk outlook.
Global X Copper Miners ETF (COPX - Free Report)
This ETF offers global access to a broad range of copper mining companies. It tracks the Solactive Global Copper Miners Total Return Index and holds 30 stocks in its basket with none making up for more than 5.7% share. Canadian firms take the largest share at 34.9% while United States and Britain round off the next two spots. The product has managed $153 million in its asset base while charging investors 65 bps in fees per year. It has soared 22.3% over the past month (read: Copper Miners ETF Hits New 52-Week High).
Invesco DB Base Metals Fund (DBB - Free Report)
This fund tracks the DBIQ Optimum Yield Industrial Metals Index Excess Return, which is a rules-based index composed of futures contracts on some of the most liquid and widely used base metals - aluminum, zinc and copper (grade A). It has amassed $166.4 million in its asset base while trades in an average daily volume of 83,000 shares. DBB charges 84 bps in annual fees and has gained 10.6% in a month. It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Bet Big on Industrial Metal ETFs on Vaccine Optimism).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>