With equity markets starting off the new year with a bang, investors are now looking to see which corners of the market are poised to perform well in 2013 and which investments they need to stay clear of. Though bonds and equities are usually an investor's main focus, currency plays are often overlooked as many shy away from this misunderstood asset class. Not surprising, currency markets thus far in 2013 have been highly active as countries around the globe continue to cobble together stimulus measures to prop up their lackluster economies. In general, the fate of an economy or any decision made by governments and central banks is closely linked to the currency market. As such, keeping a close eye on this corner of the investing universe may help investors better position themselves in 2013. Below we highlight this year's top currency trends, as forecasted by Merk Investments.
Gloomy Days for the Yen
For all simplicity purposes, the yen is indeed doomed, according to Merk Investments. Known for its dovish reputation, the Bank of Japan spent most of last year cobbling together trillions of dollars worth ofpatch-workedstimulus measures to boost the flailing Japanese economy. Despite its efforts, the nation's current account is dangerously sliding towards a deficit, which eventually will push the cost of borrowing to unsustainable levels. Japan's over 200% debt-to-GDP ratio is also a glaring red flag, leading many to be understandably bearish on the yen. For those looking to make a play on the seemingly doomed currency, there are several ETF options (both leveraged and non-leveraged) :
- CurrencyShares Japanese Yen Trust
- JPY/USD Exchange Rate ETN
- ProShares UltraShort Yen
- ProShares Ultra Yen
Diamond in the Rough: the Euro
No one can argue that the euro has had some rough times over the past few years as the region's seemingly never-ending debt crisis continues to plague the currency bloc. Merk Investments, however, believes that the euro may be the rock star of 2013, citing that regardless of the additional money-printing speculations, the balance sheet of the European Central Bank may actually shrink this year. Though such an event is highlyspeculative, many investors have already turned into closet bulls on the euro. Whether you can put your faith back into the currency or not, here are some of the most popular euro ETFs available:
- CurrencyShares Euro Trust
- ProShares UltraShort EuroETF
- ProShares Ultra Euro ETF
- Market Vectors Double Short Euro ETN
Uncertain Times for the Greenback
With Helicopter Ben indicating a pullback in the near future, Merk Investmentsbelievesthat the central bank's emphasis on employment (rather than inflation) may be a hindrance to the dollar, as growth is inherently dollar negative. Though the Fed has expressed its desire to keep the cost of borrowing as low as possible, an uptick in rates will eventually come, causing investors to be bearish on the bond market. In general, the dollar will likely see major swings this year as volatility in bonds is poised to rise in 2013. To make a play on the greenback, there are several exchange-traded options :
- DB US Dollar Index Bullish Fund
- DB US Dollar Index Bearish Fund
- 3x Long U.S. Dollar Index Futures ETN
- 3x Short U.S. Dollar Index Futures ETN
Chart AdvisorThere has been lots of hype around the IPO market lately. We'll take a look at whether now is the time to buy.
Stock AnalysisA summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
EconomicsWe share some insights on how the recent terrorist attacks in Paris could impact the economy and markets going forward.
Chart AdvisorCopper prices have been under pressure lately and based on these charts it doesn't seem that it will reverse any time soon.
Options & FuturesInvesting during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
Mutual Funds & ETFsLearn about the differences between Vanguard's mutual fund and ETF products, and discover which may be more appropriate for investors.
Mutual Funds & ETFsLearn about the difference between using mutual funds versus ETFs for retirement, including which investment strategies and goals are best served by each.
Mutual Funds & ETFsLearn about reinvesting ETF dividends, including the benefits and drawbacks of dividend reinvestment plans (DRIPs) and manual reinvestment.
Investing BasicsHeld onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
Mutual Funds & ETFsDiscover the three Vanguard funds tracking the S&P 500 Index, and learn about the characteristics and historical statistics of these funds.
Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
Exchange-traded funds (ETFs) can generate capital gains that are transferred to shareholders, typically once a year, triggering ... Read Full Answer >>
A hedge fund is a type of investment vehicle and business structure that aggregates capital from multiple investors and invests ... Read Full Answer >>
While some Vanguard exchange-traded funds (ETFs) are available commission-free from third-party brokers, a large portion ... Read Full Answer >>
Vanguard completely waives any U.S. dollar minimum amounts to buy its exchange-traded funds (ETFs), and the minimum ETF investment ... Read Full Answer >>
Mutual fund expense ratios cannot be negative. An expense ratio is the sum total of all fees charged by an asset management ... Read Full Answer >>