Volatility and uncertainty in the markets have driven investors to safer bets in exchange traded funds (ETFs). Take a look at the top five ETFs for August and you’ll see a trend emerge…
Treasury Bonds. Yields on Treasury bonds are sinking faster than a lead balloon. The yield on the 10-year has dropped to 2.58%. The 2-year yield is 0.50%, nearly a record low. But that’s not stopping investors from taking them on as a form of protection. Bond dealers on Wall Street project that the median year-end forecast for the 10-year T-note will be 2.88%. [Treasury, Gold ETFs Soar After Real Estate News.]
Recently, Federal Reserve Chairman Ben Bernanke stated that the economy is facing “unusually uncertain” prospects, which may keep inflation and interest rates suppressed for a while. Long-term bonds rose quickly after bond traders were betting on long-date issues doing better than short-term bonds in a low-growth and low-inflation environment. Long-term bond ETFs may be a good play on the diminishing short-term yields. Bond prices rise when interest rates fall, and the impact is magnified in long-term bonds. [View the August ETF Performance Report.]
- PIMCO 25+ Year Zero Coupon U.S. Treasury (NYSEArca: ZROZ): up 12.6% in August
- Vanguard Extended Duration Treasury (NYSEArca: EDV): up 11.4% in August
- iShares Barclays 20+ Year Treasury Bond ETF (NYSEArca: TLT): up 7.4% in August
Gold Miners. Gold producers are reporting huge profits, driven by the large year-over-year jump in the price of bullion. Goldcorp. (NYSE: GG) said that revenue climbed to $844 million in the second quarter as cash flow rose to $382 million. Newmont Mining (NYSE: NEM) reported that sales improved 34%. The higher gold prices seen in past weeks has helped boost Canadian mining companies, as well. [Gold Miner ETFs Riding High After Earnings.]
- Market Vectors Gold Miners ETF (NYSEArca: GDX): up 10.1% in August
- Market Vectors Junior Gold Miners ETF (NYSEArca: GDXJ): up 12.1% in August
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. 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.