For Immediate Release
Chicago, IL – June 27, 2016 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. ETFs recently featured in the blog include CurrencyShares British Pound Sterling ETF (NYSE:FXB) (FXB), iShares MSCI Europe Financials (EUFN), iShares MSCI Emerging Markets (EEM), iPath S&P 500 VIX ST Futures ETN (VXX) and SPDR Gold Shares (NYSE:GLD) (GLD).
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Here are highlights from Friday’s Analyst Blog:
U.K. Flying Solo: ETF Winners & Losers
The results of the Jun 23 referendum are out and Britain has decided to leave the Europe Union (EU), with the ‘leave’ camp gaining 51.9% Briton’s support.
The Britain-EU divorce is sure to unsettle the market momentum as it will have sweeping impacts on the global economy. Investors should note that the final voting outcome defied all poll results released this week in which chances of a ‘Bremain’ were higher than ‘Brexit.’ As a result, a market crash is well-expected as the unprecedented event is not priced in at the current level.
Negative Repercussions of Brexit
Post Brexit, Britain will be able to set its own trade agreements with the rest of the world, but will lose the benefits of free trade within the EU countries. Since EU shares an intense trade relation with Britain, the levy of new trade barriers may hurt the country’s economy.
As per the UK government data, this break-up will lead the British economy to contract by 3.8% to 7.5% by 2030. Some are of the view that Brexit would hit the low-income strata as lower national income would result in reduction of the welfare budget. Also, waning trade relations with the EU will hurt the country’s job market. British currency pound has already dived to a three-decade low against the greenback, reacting to the Brexit decision.
Positive Possibilities of Brexit
Post break-up, Britain will get rid of the sensitive immigrant issue. At the current level, the UK has no control over accepting migrants as citizens of EU members have the permission to reside in any member country.
Britain is incurring a net £3 million in cost every day due to surging EU migration. However, there is a report which says that EU immigrants added more to the UK economy in the form of tax payments than they received in public benefits.
Britain will save a considerable amount that it shells out as membership fee if it cuts ties with the EU. Also, Britain will no longer have to bear the brunt of EU’s debt crisis related hazards (read: British ETFs in Focus as Brexit Debate Flares Up ).
How Will ETF Markets React?
Needless to say, panic-induced sell-offs over the next few days will compel investors to rush to safe havens. While all risky assets are likely to go berserk in the key trading session following the Brexit, below we highlight a few ETFs that are likely to benefit or lose the most, responding to the event.
Losers
Pound Sterling – CurrencyShares British Pound Sterling ETF (FXB)
At the time of writing, the British currency ETF lost about 6.5% in the pre-market session on June 24 and will likely be thrashed once the market opens.
Europe Financials – iShares MSCI Europe Financials (EUFN)
As soon as Britain cuts the cord with the EU, its importance as a corporate transit to the rest of Europe would be lost, going by an article in CNBC. Many global institutions may even want to shift their base from London to the German capital Frankfurt – another hot spot in the European Union.
Emerging Market – iShares MSCI Emerging Markets (EEM)
Though the emerging markets are not that exposed to British shocks, just ripple effects of the negative sentiments led EEM to lose over 6% in the pre-market session (read : Bremain or Brexit: No Worries for EM ETF Investing ).
Winners
Volatility – iPath S&P 500 VIX ST Futures ETN (VXX)
Since the broader market will go into a tailspin, volatility ETFs will be on a tear in the upcoming trading sessions. In pre-market session, VXX surged about 24.3%.
Gold – SPDR Gold Shares (GLD)
Another safe-haven asset, gold, is also on a high-flying mode post Brexit decision. GLD tacked on about 4.9% gains in the pre-market session.
The turmoil will likely boost low-volatility investing overall. Here, our picks focus on the U.S. market, rules out the high-tension Europe zone and yield decently. A low volatility high-dividend approach would go a long way in protecting investors’ total return in turbulent times.
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CRYSHS-BRI PD S (FXB): ETF Research Reports
ISHARS-MS EU FN (EUFN): ETF Research Reports
ISHARS-EMG MKT (EEM): ETF Research Reports
IPATH-SP5 VX ST (VXX): ETF Research Reports
SPDR-GOLD TRUST (GLD): ETF Research Reports
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