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Thursday, August 20, 2015

The Rise Of Currency Hedged ETFs

Money tends to follow and pile into the trade that is working now, at least in the short term. One of the best trades this year has been to purchase stocks in regions of the world still employing quantitative easing (Japan and Europe) with your currency position hedged. In other words, capture rising stock markets while protecting your exposure to their local currency declining in value against the U.S. dollar.

Investors have rushed into ETFs that employ this strategy. The following shows the rise of "currency hedged" ETFs, which reached $118 billion in size by July of this year. This is another great example of the extremely positive sentiment toward the U.S. dollar currently in place.







I personally do not like to buy into a trend that is already locked in place. I like to begin buying what I believe comes next (which usually means losses and the need for patience in the short term). I am looking toward emerging market bonds and currencies today; the part of the world everyone is running full speed away from.