ETFs to Play El-Erian's Forecast

Pimco's El-Erian is not feeling as optimistic as other analysts. Late last week, the CEO announced that that the world economic system is unlikely to return to where it was prior to the global recession. He went on to predict that the new system may lead to a reshuffling of the currency hierarchy.

According to Reuters, while the financier predicts continued weakness of the U.S. dollar during the global recovery, he feels that other currencies, including the Canadian dollar, Chinese yuan, the euro and Brazilian real will gain strength. El-Erian was particularly optimistic about emerging nations, saying that their consumers will pick up where nations like the United States left off.

ETF investors have a number of options if they are looking to bank on El-Erian's currency forecasts. Single foreign currencies, such as the WisdomTree Dreyfus Chinese Yuan Fund (CYB - commentary - Trade Now), Brazilian Real ETF (BZF - commentary - Trade Now) and CurrencyShares Canadian Dollar Trust (FXC - commentary - Trade Now) give investors access to the currencies El-Erian favors on an individual basis. The WisdomTree Dreyfus Emerging Currency ETF (CEW - commentary - Trade Now) provides investors with a basket of currencies that can better diversify an ETF investor's forex exposure.

Investors looking to bank on his consumer outlook can do so with Market Vectors Brazil Small Cap ETF (BRF - commentary - Trade Now) and The Claymore/AlphaShares China Small Cap Index ETF (HAO - commentary - Trade Now). These two instruments are just some of the small-cap, emerging-market ETFs that are designed to focus heavily on the nation's domestic consumer.

At the time of publication, Dion held no positions in the ETFs mentioned.

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At the time of publication, Dion held no positions in the ETFs mentioned.

Don Dion is president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.