Markets are firing on all cylinders after recently making new all-time highs. Here are the ETFs to watch for the week of Monday, August 25, 2014:
Financial Select Sector SPDR (NYSE: XLF)
The financial sector benchmark ETF finally broke out to new highs after Bank of America (NYSE: BAC) announced it had settled allegations of wrongdoings in its mortgage unit for $16.65 billion. The news of the liability resolution/risk reduction catapulted Bank of America higher along with several other large financial institutions in XLF.
This sector has struggled amid the combination of regulatory issues and a falling interest rate environment that has slowed investor demand. However, it is certainly one to watch this coming week to see if the recent momentum morphs into a sustainable uptrend.
iShares Barclays 20+ Year Treasury Bond ETF (NYSE: TLT)
Rising treasury prices (and falling interest rates) have been one of the most persistent trends of 2014; there's strong demand for this safe haven asset class. As a result, TLT has now gained more than 17 percent this year.
One dynamic that has the potential to shake up the treasury trade is rhetoric from global central bank executives that met in Jackson Hole, Wyoming last week. These policymakers issued statements on labor force participation, inflation and other factors that could impact the economy moving forward.
If interest rates begin rising once again, TLT will find itself falling precipitously and reversing its 2014 gains.
iShares U.S. Home Construction ETF (NYSE: ITB)
This week investors are anticipating the release of new home sales, Case-Shiller home prices and pending homes sales data for July. These key real estate indicators may impact ITB, which provides exposure to publicly-traded companies that are engaged in residential home construction.
This ETF is typically quite sensitive to this data as well as earnings announcements for the largest underlying holdings such as D R Horton (NYSE: DHI) and Lennar Corp (NYSE: LEN). ITB has gained more than 9 percent so far in August, as the outlook has improved for these manufacturing companies. However, this ETF is still in negative territory in 2014 and has a long way to go to regain its long-term uptrend.
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