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ETFs that Won & Lost Post Fed Meet

As widely expected, the Fed stayed put in its April meeting, keeping the rates unchanged. Global growth worries and moderation in U.S. growth held the Fed back from taking forward the policy tightening step that it took in December 2015 for the first time after almost a decade.

A terrible tumult in the global investing backdrop led by the Chinese market crash and swooning oil forced the Fed to halve its number of rate hike estimates for 2016 from four to two in its March meeting. Also, Fed chair Yellen had reaffirmed the ‘cautious’ stance on future policy tightening at that time.

What’s New in the Meeting?

While the April meeting did not show any major shift from that standpoint, a subtle optimism was heard from the Fed. This was inevitable as the global markets staged a recovery in the past weeks with China, one of the key spoilers, showing signs of improvement. The other cause of concern, oil, has also gained a measure of stability thanks to hopes over easing supply glut.  

The dual dose led the U.S. central bank to stay away from comments like “however, global economic and financial developments continue to pose risks” from this month’s statement. Instead, it focused more on keeping an eye on the inflationary scenario as well as the ‘global economic and financial developments’. 

The Fed continues to stress on muted inflationary pressure in the near term, hurt by previous declines in energy prices. However, it expects U.S. inflation to be close to 2% over the medium term. Another deterrent was moderating growth in household spending, though households' real income is expanding at a "solid rate" and consumer sentiment is upbeat.

However, while the Fed maintained the key interest rates in April, things might change in its June meeting. At least, plenty of positive vibes in the policy statement including a healing labor market and the latest uptick in the global markets buoyed by China and oil may allow the Fed to enact a hike in June (read: Is It Finally Time for China ETFs?).

Market Impact

The world was almost sure about a dovish Fed meeting this time around. As a result, the stock market reacted moderately. Among the top ETFs, investors saw SPY gain over 0.2% on April 27, DIA  advance over 0.3% but QQQ move lower by 0.8% mainly to reflect downbeat tech earnings.

Some subtle moves in various markets and asset classes were also noticed. U.S. sovereign bond prices recorded gains post Fed meeting. Below we discuss a few ETFs that were among the biggest movers and could remain in focus ahead.

The Losers

PowerShares DB US Dollar Bullish Fund (UUP)

The U.S. dollar was a loser following a dovish Fed. The U.S. dollar ETF UUP was down over 0.1% on April 27.

The Gainers

iShares 20+ Year Treasury Bond (TLT)

Though the long-term U.S. treasury yields were on an uptrend lately on the return of the risk appetite, yields took a dive post Fed. The yield on the 10-year U.S. Treasury fell 7 bps to 1.87% on April 27, while yield on 20-year U.S. Treasury dropped 5 bps to 2.30% on April 27. As a result, ultra-popular bond ETF TLT gained about 1% on April 27.

PowerShares High Yield Equity Dividend Achievers Portfolio ETF (PEY)

Since bond yields plummeted, the need for higher yield is also necessary. Thus PEY gained about 1.1% on April 27. The fund gives exposure to stocks that are chosen on the basis of dividend yield and consistent growth in dividend (read: ETF Picks for a Retirement Portfolio   ).

PowerShares FTSE RAFI Emerging Markets ETF (PXH)

Emerging markets ETFs were the beneficiaries of this move. A few more days of cheap money inflows must have boosted the space. PXH was up over 1.1% on April 27 (read: Emerging Markets Back On Track: 5 Outperforming ETFs).

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SPDR-SP 500 TR (SPY): ETF Research Reports
 
SPDR-DJ IND AVG (DIA): ETF Research Reports
 
NASDAQ-100 SHRS (QQQ): ETF Research Reports
 
PWRSH-DB US$ BU (UUP): ETF Research Reports
 
ISHARS-20+YTB (TLT): ETF Research Reports
 
PWRSH-HY EQ DV (PEY): ETF Research Reports
 
PWRSH-F/R EMP (PXH): ETF Research Reports
 
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