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NEW YORK ( ETF Expert) -- It is the third-largest provider of ETFs. It successfully leveraged its reputation as the low-cost leader of indexing. Regardless of your investment approach or philosophy,
Vanguard offers more than 65 vehicles to get you to your destination. Halfway through 2013, it makes sense to evaluate the impact of a variety of market movers (e.g., global economy, central bank policies, geopolitical backdrop, corporate well-being, etc.) on different asset classes. I thought it might make sense to do so in the context of the products that Vanguard offers.
1. U.S. stocks via Vanguard Total Stock Market(VTI). Corporate earnings have remained reasonably strong over the past 12 months, though profitability has largely been a function of debt restructuring and productivity increases. In contrast, actual sales numbers have been flat. Higher interest rates have already caused consumers to slow down on big ticket purchases. What's more, economic contraction in Europe as well as global political upheaval are likely to affect forward guidance for U.S. companies. Even the technical resistance of the 50-day moving average is giving bearish traders food for thought.
2. U.S. bonds via Vanguard Total Bond Market(BND). The
Federal Reserve's "tapering bomb" eviscerated income investors in the second half of the second quarter. With jobs data being strong enough to give the Fed some ammunition to follow through, rising rates could plague bondholders into the fall. Even the technical picture for BND is noticeably weak.
On the other hand, with eurozone debt fears reigniting, safe haven seekers may like the idea of U.S. Treasuries and other domestic investment grade bond assets. Many have gone so far as to suggest that the Fed's 10-year yield target is now 2.5%. (I think it will end the year closer to 2%.)
3. Foreign developed stocks via Vanguard Europe(VGK). The U.S. by itself may the largest economy in the world, yet the eurozone (a.k.a. the 17 countries in the European Monetary Union) has often been described as the largest economic force on earth.
With more than half of those member countries in extended periods of recession, however, it may be difficult to get excited about the investment opportunities of resident corporations. Portugal and Greece have unsustainable debt loads as measured by their 10-year sovereign bonds. Moreover, Portugal's leadership is crumbling. Even a rise in the yields of Spanish and Italian bonds warrants vigilance. Equally disconcerting, all of VGK's 2013 gains have been wiped out.