After over a month of watching Capitol Hill and Pennsylvania Avenue, Wall Street can get back to what it knows best: Wall Street.
The first full week of earnings season is dominated by the financial sector - big investment banks and commercial banks - just as retail investors, free from the "fiscal cliff" worries, have started to get back into the markets.
Equities have risen in the new year, rallying after the initial resolution of the fiscal cliff in Washington on January 2. The S&P 500 on Friday closed its second straight week of gains, leaving it just fractionally off a five-year closing high hit on Thursday.
Investors were greeted with a slightly better-than-anticipated first week of earnings, but expectations were low and just a few companies reported results.
Worries about the protracted fiscal cliff negotiations drove the markets in the weeks before the ultimate January 2 resolution, but fear of the debt ceiling fight has yet to command investors' attention to the same extent.
For the week, the S&P and Dow both gained 0.4 percent and the Nasdaq rose 0.8 percent. (commentary & photo courtesy of Reuters)
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This past week I added positions in the following to the RSI portfolio:
- PowerShares WilderHill Clean Energy (PBW)
- iShares MSCI BRIC Index (BKF)
- iShares MSCI Turkey Invest Mkt Index (TUR)
Currently the RSI has a 50% cash reserve allocation. I anticipate more of the cash reserves will be committed to the market. The following funds will be considered.
RSI selected three outstanding candidates this week:
- iShares Dow Jones US Home Construction (ITB)
- Credit Suisse Cushing 30 MLP Index ETN (MLPN)
- iShares MSCI All Peru Capped Index (EPU)
Taking ITB first, it has been in a strong uptrend since October 2011. Maybe it is long in the tooth, but the return of housing market makes it a good candidate once it has pulled back. Money flow has flattened out. At this point, don’t chase it. A bit of patience is warranted here.
MLPN is a fund of Master Limited Partnerships (MLP). It pays out a 5.55% yield. It is attracting investor’s dollars in anticipation of the growth of the US energy market and because of its generous yield. I like this fund at this stage of the market.
Last is the Peru fund EPU. It has performed nicely with investors expecting great things from this resource rich country. It pays a 3.56% yield. I like this ETF, but I understand if one wishes to waits until there is a pullback before buying.
That’s it for this weekend.