Real Estate, Euro, and Total Return ETFs To Watch This Week

The first day of trading in 2015 resulted in a nearly flat performance for the SPDR S&P 500 ETF (SPY).  However, under the surface, traders are positioning for what could be a return of volatility in the New Year after a relatively placid 12 months.  

The week ahead features a robust economic calendar that includes monthly non-farm payroll data, FOMC minutes, and December motor vehicle sales.   In addition, the markets will be preparing for fourth quarter earnings from companies such as Alcoa Inc (AA).  

Here are the key ETFs to watch for the week of Monday, January 5:

iShares U.S. Real Estate ETF (IYR)

REITs were one of the bright spots of 2014 and started the New Year with promise as well.  On Friday, IYR jumped more than 1 percent as long-term interest rates continued their downward trend.  This ETF tracks a diversified basket of 111 real estate investment trusts across a variety of sectors such as retail, commercial, and residential.

REITs are traditionally sensitive to interest rate fluctuations and the FOMC meeting this week may shed more light on the direction of bond yields this year.  An accommodative Federal Reserve will likely bode well for this income generating asset class once again.  

Currency Shares Euro Trust (FXE)

The euro fell to new 52-week lows against the U.S. dollar last week as foreign currency markets continue to show momentum favoring the dollar.  FXE tracks the daily price fluctuations of the euro and allows ETF investors to participate in a currency play.  

The weakness in European bond yields combined with the potential for quantitative easing measures overseas has sent FXE 12 percent lower over the last year.  Other ETFs impacted by this trend have been the PowerShares U.S. Dollar Bullish (UUP) and Currency Shares Japanese Yen Trust (FXY).  

PIMCO Total Return ETF (BOND)

PIMCO announced last week that its Total Return strategy had $19.4 billion in outflows in December, which marked the 20th straight month of net asset losses.  The fund has suffered from mediocre performance in recent months and the departure of Bill Gross from the firm that he founded several decades prior.  

The fixed-income world will be closely watching the performance of BOND over the next quarter to determine if the team of new managers can right the ship.