July was a better month for the markets, especially in Europe, where a bank stress test allayed most fears about the continent’s finances. However, back in the United States, deflation seems to be the fear of the moment. As a result, gold traders, who were betting on an inflation hedge, started dumping gold exchange traded funds (ETFs).
This Month’s Best:
Europe. Last week, the euro surged to an 11-week high against the dollar, topping $1.31 as prospects for the eurozone did an apparent 180. Only seven of Europe’s 91 largest banks needed more capital to withstand any declines in economic growth or deterioration in sovereign debt issued by Greece, Portugal and Spain. Bank regulators and Central Bankers assert that the tests were rigorous and fears about Europe’s finances were overblown. [Europe ETFs Don’t Stress After Tests, But Should Investors?]
- iShares MSCI Spain (NYSEArca: EWP): up 24% in July
- iShares MSCI Austria (NYSEArca: EWO): up 19.1%
- iShares MSCI Italy (NYSEArca: EWI): up 18.2%
Solar. Solar is hot right now…pun intended. Currently, New York is offering residents $1.75 per watt up to a maximum of 5 kW per solar site. For commercial customers, the maximum is 50 kW. But considering the cost to setup a solar system, the savings do not go a long way. In addition to implementing incentive policies, economies of scale are also helping to make solar a viable alternative energy. [The Bright Future of Solar ETFs.]
- Claymore/MAC Global Solar Energy (NYSEArca: TAN): up 18.1%
Turkey. Turkey may have the potential to generate the kind of performance that the BRICs have over the last decade. Turkey is churning out industrial output at six months straight and is up 15.5% from a year earlier, down from 17% in April. The country has made up for any losses a year earlier and is posting the second largest economic growth-second only to China. Turkey’s banks are some of the most tightly regulated in the region and many dodged the financial crisis that the rest of the world is facing. [Turkey ETF: Waiting on EU Membership.]
- iShares Turkey (NYSEArca: TUR): up 16.7%
The Worst Performers:
Gold. It might be getting tough to justify buying gold with all the signs of disinflation or even deflation that have been cropping up lately. And those fears have some basis: the consumer price index declined 0.1% in June. It was the third consecutive decline. As a result of the concerns, gold ETFs took a step back. [Why Gold ETFs Are Declining.]
- Market Vectors Gold Miners ETF (NYSEArca: GDX): down 7.2%
- PowerShares DB Gold Fund ETF (NYSEArca: DGL): down 5.4%
- SPDR Gold Shares ETF (NYSEArca: GLD): down 5.1%
- iShares Comex Gold Trust ETF (NYSEArca: IAU): down 5%
U.S. Dollar. In the wake of the results of the European bank stress tests last Friday, euro ETFs are up slightly against the U.S. dollar. Some experts feel that good test results may have already been priced in, which meant the euro wouldn’t make wide swings in either direction.
- PowerShares DB U.S. Dollar Bullish (NYSEArca: UUP): down 5.3%
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.