The traditional investors may pin hopes on the Santa Clause rally in the most successful month of the year i.e. December, but they should note that this time Christmas might be a little dull, defying the natural progression of the end-of-season rally.
A consensus carried out from 1950 to 2013 has revealed that December has ended up offering positive returns in 49 years and negative returns in 16 years, with an average return of 1.59%, as per moneychimp.com, the best of the year.
But this year, the Fed is scheduled for a rate hike after a decade, provided the economic momentum remains the same. And though the move now seems well digested by the market, a certain shock is inevitable post lift-off.
In any case, 2015 had been quite downbeat so far. Even historically strong months couldn’t live up to investors’ expectations. All these made December a keenly watched month to the investing legion. We thus pin point a few ETFs that are highly in focus and could hop or drop in December.
iPath US Treasury Flattener ETN (FLAT)
As the Fed hikes the benchmark interest rate, the initial blow would be on the short-end of the yield curve. The investing world has already started to prepare for the move. As a result, yield on the 6-month Treasury note soared 15 bps from the 0.27% level seen at the start of November to 0.42% on November 30. In the same time frame, the yield on the 10-year Treasury note rose just 1 basis point to 2.21%. In fact, in the recent sessions, yields on 10-year U.S. treasuries declined indicating a flattening of the yield curve.
So, a keen watch on the inverse bond ETF FLAT is needed to earn some quick gains from the bond market.This product provides inverse exposure to the Barclays US Treasury 2Y/10Y Yield Curve Index, which delivers returns from the steepening of the yield curve through a notional rolling investment in U.S. Treasury note futures contracts. FLAT was up 1.3% in the last one month (read: 3 Treasury Bond ETFs to Play Rising Short Term Yields).
Barron’s 400 ETF (BFOR)
This all-cap U.S. equity ETF could be in watch in December. The fund could be used as a representative of the total stock market performance in a volatile (expectedly) month. The fund is made up of high quality U.S. stocks. Since, the month of December is likely to stay volatile and large-cap stocks might be hurt by rising greenback post Fed tightening, an all-cap quality U.S. ETF might be the key to win ahead (read: 5 High Quality ETFs for an Uncertain Market).
US Equity High Volatility Put Write Index Fund (HVPW)
