U.s. Dollar Bull Market Essay

2104 Words Mar 19th, 2016 null Page
Last year, we expected volatility in the energy market and a U.S. dollar bull market to be positive for low volatility funds in the United States. The iShares USA Minimum Volatility (USMV) was the top pick for best ETF to buy before 2015, and the fund performed admirably. The fund finished with a gain of 5.45 percent in 2015, which outperformed the 1.25 percent return of the SPDR S&P 500 (SPY). The fund achieved the return with less volatility and a trading range of 10 percent from high to low. For SPY, the range was 40 percent, which is 14 percent larger than USMV.

For the year 2016, volatility could resemble 2015. The stock market enjoyed abnormally low volatility during the Federal Reserve’s zero interest rate period, but with rates starting to return to normal, market volatility is also likely to resume. The U.S. dollar finished 2015 near its highs and remains in a bull market. A pullback is possible, but overall a strong dollar will favor U.S. assets. Most importantly, China and other emerging markets are the greatest areas of concern. USMV will continue to benefit from avoiding these areas.

Defining Volatility

Beta is a popular way to measure certain forms of investment risk. According to Investopedia, beta measures the systemic risk of securities compared to overall markets. The capital asset pricing model, known as CAPM, calculates return on assets based on the securities overall beta and expected market returns.
The total stock market, which is often used as…

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