Monday, August 13, 2018

Foreign Currency Markets Steal the Show

Monday, August 13, 2018 - By Friday of last week, the Turkish Lira had taken the center show pushing aside interest rate, trade war and inflation concerns. The lira’s plummet led to a mild sell off across global equity markets. While policymakers talked down the significance of the effect of the lira crash, the situation worsened when the POTUS announced significant tariffs on imports of Turkish Steel and Aluminum. The European Central Bank met over the weekend to assess French, Italian and Spanish bank exposure to Turkish loans. The crash has continued into this morning with other emerging market currencies being dragged down. The lira is down over 44% year to date. Other countries running current account deficits are under pressure as well.  This is what a currency crash looks like thanks to our friends at Dow Jones.














As we warned investors on June 11
th, the canary in the coal mine was in our view Brazil’s stock market drop that week.  August tends to be a month with increased volatility and the one that currency crises tend to favor as noted below:

Recent Currency Crises of Significance
July 1997           Thai Bhat crisis and beginning of the Asian Contagion
August 1998      Russian Ruble and Debt crisis
August 2015      China Yuan devaluation and global market correction
August 2018      Turkish Lira plummets 23% in one week. 

We hope our readers brought a fully charged cell phone to the beach this weekend.

US indexes ended last week flat for the S&P 500 and the NASDAQ Composite with the indexes closing at 2,833.28 and 7,839.11 respectively for a weekly move of minus .25% and plus .35%.

A brief tour around the globe would raise some orange flags and red flags for some emerging market investors. The usual concerns of rising US interest rates, inflation and increasing trade tensions were eclipsed by the rising US Dollar and the increasing pressure on select emerging markets and Italian bonds. Countries running large current account deficits particularly Brazil, India, Indonesia, Turkey and South Africa may offer trading opportunities via various Country Funds which can be found in the ETF Global Screener.  Expect Investor money to flee these markets for the safety of US money markets.

Domestic Politics and International Relations will determine how far the Turkish crisis goes.  Endogan needs to continue domestic expansionary policies to keep his base. This will lead him to mend relations with the US and Europe in return for a bailout or pursue a new alliance with either China and/or Russia or face a severe domestic economic shock of crushing interest rate increases and capital controls.

For those who want to play the news, TUR, the iShares MSCI Turkey ETF would be a good trading vehicle. To play a scenario of a continued strong US Dollar – let us not forget Brexit is looking increasingly like a rough landing and any banking crisis resulting from Italian debt pressures or Turkish defaults, investors may want to use FXB, the Invesco British Pound Currency Shares ETF.

Forgotten in this week’s headlines was the 10 year anniversary of the Russo -Georgian War which many believe marked the end of the Post-Cold War Era and set the stage for the breakdown of the global regime of that era. We will look at the significance of this for investors next week.

We suggest a mindful eye on tools like our Select List and Risk and Reward Ratings that can be used to evaluate the vast set of opportunities in the ETF marketplace. Today’s market realities require a new approach to macro investing, one in which individual investors now have access to tools via ETPs to customize risk and return profiles in their portfolios. Use our Scanner to find those funds.

Thank you for reading the ETF Global Perspectives


_____________________________________________________________
Assumptions, opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice.  ETF Global LLC (“ETFG”) and its affiliates and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively ETFG Parties) do not guarantee the accuracy, completeness, adequacy or timeliness of any information, including ratings and rankings and are not responsible for errors and omissions or for the results obtained from the use of such information and ETFG Parties shall have no liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of such information. ETFG PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE.  In no event shall ETFG Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the information contained in this document even if advised of the possibility of such damages.

ETFG ratings and rankings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities or to make any investment decisions. ETFG ratings and rankings should not be relied on when making any investment or other business decision.  ETFG’s opinions and analyses do not address the suitability of any security.  ETFG does not act as a fiduciary or an investment advisor.  While ETFG has obtained information from sources they believe to be reliable, ETFG does not perform an audit or undertake any duty of due diligence or independent verification of any information it receives.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.  Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue.  Prices, values, or income from any securities or investments mentioned in this report may fall against the interests of the investor and the investor may get back less than the amount invested.  Where an investment is described as being likely to yield income, please note that the amount of income that the investor will receive from such an investment may fluctuate.  Where an investment or security is denominated in a different currency to the investor's currency of reference, changes in rates of exchange may have an adverse effect on the value, price or income of or from that investment to the investor.

Tuesday, August 7, 2018

Trillion Dollar Baby

Tuesday, August 7, 2018 – After a week that saw Facebook (FB) set a new record for the biggest one day drop in Market Cap, the market needed a big win and much like J.J. Abrams, they decided to go back to the favorites with two of this bull market’s biggest winners. First, Apple (AAPL) managed to become the world’s first publicly traded company with market capitalization above $1 Trillion, then Tesla (TSLA) accomplished the truly unexpected, an actual apology from Elon Musk. And while Apple and Tesla made most of the headlines, our ETFG Quant data models were showing value-oriented funds beginning to find favor, signaling that the story of the bull markets comeback might be premature.

We’ve talked before about our ETF screening methodology that includes Behavioral factors like price momentum, short interest and implied volatility and we often look for common themes among the biggest weekly movers. What was noticeable to us at the end of last week was the list of funds which saw the biggest week-over-week change in their aggregate ETFG Behavioral score is lacking a substantial tech presence.













If there was one defining characteristic of the funds that made up our list of top movers last week, it’s that their combination of slow growth and financial stability puts them into the category of “anti-Teslas.” It has been a rough 18 months for value stocks but depending on the funds you use, last week was the third consecutive week that value outperformed growth although it has a long way to go before grabbing headlines with Vanguard Value (VTV) lagging 800 bps behind Vanguard Growth (VUG) YTD.























Not quite, as the presence of two Invesco funds, Invesco S&P 500 Low Volatility ETF (SPLV) and Invesco S&P 500 High Dividend Low Volatility ETF (SPHD), helps to muddy the narrative. Drawing your investments from the same pool leads to cross holdings, including certain consumer staples names, but focusing on the easy answer can quickly lead you to the wrong conclusions. Both funds also have significantly higher allocations to other value sectors including utilities. Most investors would be quick to point out that these two Invesco Funds are just as beholden to their number one sector, Utilities, which have had a strong few weeks as long-term bond yields begin to stabilize. If you can’t get past how utilities are historically rate sensitive, consider the fact that earnings season is now almost complete and utilities stocks did relatively well in the 2Q.

ETF Global Liquidation Watch:
Investors should also note that DB Agricultural Long ETN (AGF), X-Trackers MSCI China A Inclusion Equity ETF (ASHX) and DB Base Metals Double short ETN (BOM) have popped up on our monthly report, ETF Global Liquidation Watch List – August 2018 with a declining (TTM) Trailing Twelve Months of -10.98%, -14.19% and -18.76% respectively.

Thank you for reading ETF Global Perspectives!

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_____________________________________________________________
Assumptions, opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice.  ETF Global LLC (“ETFG”) and its affiliates and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively ETFG Parties) do not guarantee the accuracy, completeness, adequacy or timeliness of any information, including ratings and rankings and are not responsible for errors and omissions or for the results obtained from the use of such information and ETFG Parties shall have no liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of such information. ETFG PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE.  In no event shall ETFG Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the information contained in this document even if advised of the possibility of such damages.

ETFG ratings and rankings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities or to make any investment decisions. ETFG ratings and rankings should not be relied on when making any investment or other business decision.  ETFG’s opinions and analyses do not address the suitability of any security.  ETFG does not act as a fiduciary or an investment advisor.  While ETFG has obtained information from sources they believe to be reliable, ETFG does not perform an audit or undertake any duty of due diligence or independent verification of any information it receives.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.  Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue.  Prices, values, or income from any securities or investments mentioned in this report may fall against the interests of the investor and the investor may get back less than the amount invested.  Where an investment is described as being likely to yield income, please note that the amount of income that the investor will receive from such an investment may fluctuate.  Where an investment or security is denominated in a different currency to the investor's currency of reference, changes in rates of exchange may have an adverse effect on the value, price or income of or from that investment to the investor.

Monday, July 30, 2018

Tech Crunch?

Monday, July 30, 2018 – Last week saw a bumpy ride for the equity markets that featured a divergence within the Tech Sector countered by continued strong earnings across most other earnings reports. While Amazon and Alphabet beat earnings estimates and moved higher, on Thursday, Facebook experienced the largest one-day loss ever in market capitalization after warning the Street that growth was slowing. Also pressuring the Tech sector were Intel and Twitter with disappointing earnings reports.  For the week, the DJIA added 1.6%, the S&P 500 climbed .6% and the Nasdaq rose 1.1%.

ETFG Quant Movers – those ETFs who have had the largest weekly change in their respective, overall ETFG Quant ratings: 

·    ETFG Quant Winners: PEZ (Invesco DWA Consumer Cyclicals Momentum ETF) jumped 13.58 points to 45.85, EELV (Invesco S&P Emerging Markets Low Volatility ETF) rose 11.67 to 55.97 and PIN (Invesco India ETF) improved to 44.17 with an increase of 10.54 points in its ETFG Quant Rating.

·    ETFG Quant Losers: BTAL (AGFiQ US Market Neutral Anti-Beta Fund) dropped 9.75 points to 26.93, IAI  (iShares U.S. Broker-Dealers & Securities Exchanges ETF) lost 9.10 to 37.89 and FIEG (FI Enhanced Global High Yield Exchange Traded Notes) oved lower by 8.28 points to  46.79.

ETFG Weekly Select List - the 5 most highly rated ETFs per Sector, Geographic Region and Strategy as ranked by the ETFG Quant model. We’d like to highlight some substantial movement in the Sector and Strategy portion when comparing this week’s Select List to last. We saw 4 new funds that were unranked last week claim a spot in the top 2 through 5 positions the Broad Equity category. First Trust Chindia ETF (FNI), AdvisorShares Dorsey Wright ADR ETF (AADR), iShares MSCI Brazil ETF (EWZ) and iShares MSCI Mexico ETF (EWW) made an appearance respectively.

We saw similar movements in the Technology Sector. BlueStar Israel Technology ETF (ITEQ), iShares Edge MSCI Multifactor Technology ETF (TCHF), First Trust Nasdaq Semiconductor ETF (FTXL) and First Trust Nasdaq Cybersecurity ETF (CIBR) secured 2nd through 5th respectively. These four funds have seen a steady returns but this sector will become extremely interesting in the months to come with the impending Global Industry Classification Standards (GICS) reorganization.

Thanks for reading ETF Global Perspectives.

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_____________________________________________________________
Assumptions, opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice.  ETF Global LLC (“ETFG”) and its affiliates and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively ETFG Parties) do not guarantee the accuracy, completeness, adequacy or timeliness of any information, including ratings and rankings and are not responsible for errors and omissions or for the results obtained from the use of such information and ETFG Parties shall have no liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of such information. ETFG PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE.  In no event shall ETFG Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the information contained in this document even if advised of the possibility of such damages.

ETFG ratings and rankings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities or to make any investment decisions. ETFG ratings and rankings should not be relied on when making any investment or other business decision.  ETFG’s opinions and analyses do not address the suitability of any security.  ETFG does not act as a fiduciary or an investment advisor.  While ETFG has obtained information from sources they believe to be reliable, ETFG does not perform an audit or undertake any duty of due diligence or independent verification of any information it receives.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.  Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue.  Prices, values, or income from any securities or investments mentioned in this report may fall against the interests of the investor and the investor may get back less than the amount invested.  Where an investment is described as being likely to yield income, please note that the amount of income that the investor will receive from such an investment may fluctuate.  Where an investment or security is denominated in a different currency to the investor's currency of reference, changes in rates of exchange may have an adverse effect on the value, price or income of or from that investment to the investor.

Friday, July 27, 2018

SS&C SVC adds ETF Global® to its Managed Data Services

Friday, July, 27, 2018 - Press Release -The ability to aggregate data from multiple vendors is crucial for managing assets on a global platform and a necessity in an age where manual price validation creates additional cost and risk. SS&C SVC offers a single, cost-effective, data feed for a comprehensive range asset classes. The data is aggregated from multiple sources, validated, enriched and directly fed into SS&C’s portfolio of investment management platforms and third-party solutions.

SS&C SVC is pleased to announce that it will offer Exchange Traded Fund (ETF) data and research throughout the entire SS&C SVC enterprise. The data and research will be provided through our new partner, ETF Global®. ETF Global is a leader in data, research and proprietary risk analytics for Exchange Traded Products.

ETFs have shown steady growth over the past 12 years, with more than 4,700 ETFs worldwide reported in 2016.  In 2017, inflows for exchange-traded funds shattered 2016 records, topping $464 billion according to data from State Street Global Advisors. As this asset class continues to grow, timely ETF research and data becomes ever more critical for responsible asset management.

With the addition of ETF Global, our clients now have an even more comprehensive, single source for timely data and research, so they can find all the information they need in one place.
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Thank you for reading ETF Global Perspectives.

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_____________________________________________________________
Assumptions, opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice.  ETF Global LLC (“ETFG”) and its affiliates and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively ETFG Parties) do not guarantee the accuracy, completeness, adequacy or timeliness of any information, including ratings and rankings and are not responsible for errors and omissions or for the results obtained from the use of such information and ETFG Parties shall have no liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of such information. ETFG PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE.  In no event shall ETFG Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the information contained in this document even if advised of the possibility of such damages.

ETFG ratings and rankings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities or to make any investment decisions. ETFG ratings and rankings should not be relied on when making any investment or other business decision.  ETFG’s opinions and analyses do not address the suitability of any security.  ETFG does not act as a fiduciary or an investment advisor.  While ETFG has obtained information from sources they believe to be reliable, ETFG does not perform an audit or undertake any duty of due diligence or independent verification of any information it receives.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.  Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue.  Prices, values, or income from any securities or investments mentioned in this report may fall against the interests of the investor and the investor may get back less than the amount invested.  Where an investment is described as being likely to yield income, please note that the amount of income that the investor will receive from such an investment may fluctuate.  Where an investment or security is denominated in a different currency to the investor's currency of reference, changes in rates of exchange may have an adverse effect on the value, price or income of or from that investment to the investor.

Monday, July 23, 2018

Earnings Power

Monday, July 23, 2018 - Earnings season is in full throttle and we see no sign of US companies slowing down. The overwhelming majority of S&P 500 companies that have already reported 2nd Quarter earnings have toppled analyst expectations and are keeping markets steady throughout more geopolitical turmoil.

There was a small meeting that took place two weeks ago in Helsinki where President Trump met with Vladimir Putin to discuss Russian/American relations. Did I say small? I meant to say big, it was a big meeting that has been the talk of the world since it happened. Last week however, Trump set his sights on criticizing a few other powerful bodies. He let it be known that he was not happy with the way the Federal Reserve was raising interest rates, all while countries like China and the European Union are “manipulating their currencies lower” to gain a competitive advantage over the US.

All in all, markets took the good and the bad and remained stagnant with the Dow Jones Industrial Average rising just .2%, the S&P 500 .01% and the Nasdaq Composite .1% for the week.

In ETFs, we continue to see Fund Flows into some of the largest Fixed Income ETPs, with the iShares iBoxx Investment Grade Corporate Bond ETF LQD and the iShares Core U.S. Aggregate Bond ETF AGG on top of the chart in that asset class. MTD they have seen $1.66B and $997M worth of inflows. Another big winner, but outside of fixed income, was SCHX which is the Schwab US Large Cap ETF.  It took in about $1.07B worth of inflows MTD which accounts for about 10% of its AUM.

In our Weekly Quant Movers, we saw winners all over the spectrum with the iShares US Regional Banks ETF (IAT), ProShares S&P 500 ex-Energy ETF (SPXE) and the WisdomTree Emerging Markets High Dividend Fund (DEM) all adding points to their reward scores. They gained 10.14, 9.80 and 8.20 to their overall scores respectively.

In the losers column, we saw the same type of disparity with the X-trackers Harvest CSI 300 China A-Shares Fund (ASHR), the Vanguard Energy ETF (VDE) and the Fidelity MSCI Information Technology Index ETF (FTEC) all dropping points in the reward scores. They lost 6.99, 6.97 and 6.91 to their overall scores respectively.

As earnings season continues, we will see if strong reporting can offset any geopolitical concerns that will undoubtedly pop up. This week some key companies are going to be reporting such as Facebook, PayPal, Amazon and Verizon. For these, we will be keeping an eye on ETFs such as XLK, XLY and QQQ.

Thanks for reading ETF Global Perspectives.

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_____________________________________________________________
Assumptions, opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice.  ETF Global LLC (“ETFG”) and its affiliates and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively ETFG Parties) do not guarantee the accuracy, completeness, adequacy or timeliness of any information, including ratings and rankings and are not responsible for errors and omissions or for the results obtained from the use of such information and ETFG Parties shall have no liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of such information. ETFG PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE.  In no event shall ETFG Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the information contained in this document even if advised of the possibility of such damages.

ETFG ratings and rankings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities or to make any investment decisions. ETFG ratings and rankings should not be relied on when making any investment or other business decision.  ETFG’s opinions and analyses do not address the suitability of any security.  ETFG does not act as a fiduciary or an investment advisor.  While ETFG has obtained information from sources they believe to be reliable, ETFG does not perform an audit or undertake any duty of due diligence or independent verification of any information it receives.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.  Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue.  Prices, values, or income from any securities or investments mentioned in this report may fall against the interests of the investor and the investor may get back less than the amount invested.  Where an investment is described as being likely to yield income, please note that the amount of income that the investor will receive from such an investment may fluctuate.  Where an investment or security is denominated in a different currency to the investor's currency of reference, changes in rates of exchange may have an adverse effect on the value, price or income of or from that investment to the investor.

Monday, July 16, 2018

And the resilience continues…

Monday, July 16, 2018 - The Markets are still proving skeptics wrong time and time again as they continue their march upwards outlasting political noise that would seem to only have a negative effect on them. The latest news that they have shrugged off is the additional tariffs that President Trump would like to levy on China for $200B worth of goods. Yes, there was a bit of a shock wave mid-week when the President announced the news, but it didn’t stop the Dow Jones Industrial Average from gaining 2.3%, the S&P 500 from gaining 1.5% and the Nasdaq Composite from reaching levels over 7800.

In ETFs, during the first 15 days of the quarter, we have seen outflows in some of the largest products on the market such as SPY that has lost about 1.54% or over $4B. The iShares Emerging Markets ETF, EEM has seen redemptions top $3.25B in the month of July which makes up over 7% of its AUM and the Vanguard High Dividend Yield ETF, VYM lost over $3.2B or about 13% of its AUM, all according to the ETFG Fund Flow Summary.

In July, we have seen the greatest inflows into fixed income products. The chart toppers were the iShares iBoxx Investment Grade Corporate Bond ETF, LQD which gained about $1.82B of inflows and the Vanguard Short-Term Bond ETF, BSV which added $1.14B to its AUM.

In our weekly Quant Movers, we saw technology-based ETFs take the biggest losses. These included the iShares North American Tech ETF, IGM and the Invesco NASDAQ Internet ETF, PNQI which lost 8.39 and 7.89 to their overall scores respectively.

In the winners column, we saw a broad variety of products add points to their overall scores. These included the Alerian MLP Infrastructure Index ETN, MLPB, the Vanguard FTSE Developed Markets ETF, VEA and the Franklin LibertyQ Emerging Markets ETF, FLQE which gained 14.99, 9.66 and 8.67 points to their overall Quant Scores.

As the 3rd quarter continues to play out, it will be interesting to see if the trade war talks, North Korea/ Russian news or the new types of relationships we are developing with our closest allies actually play a long term effect on the markets. Until then, it seems like the broad-based indices will continue to play to the same tune: onward and upward!

Thanks for reading the ETF Global Perspectives!

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_____________________________________________________________
Assumptions, opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice.  ETF Global LLC (“ETFG”) and its affiliates and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively ETFG Parties) do not guarantee the accuracy, completeness, adequacy or timeliness of any information, including ratings and rankings and are not responsible for errors and omissions or for the results obtained from the use of such information and ETFG Parties shall have no liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of such information. ETFG PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE.  In no event shall ETFG Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the information contained in this document even if advised of the possibility of such damages.

ETFG ratings and rankings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities or to make any investment decisions. ETFG ratings and rankings should not be relied on when making any investment or other business decision.  ETFG’s opinions and analyses do not address the suitability of any security.  ETFG does not act as a fiduciary or an investment advisor.  While ETFG has obtained information from sources they believe to be reliable, ETFG does not perform an audit or undertake any duty of due diligence or independent verification of any information it receives.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.  Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue.  Prices, values, or income from any securities or investments mentioned in this report may fall against the interests of the investor and the investor may get back less than the amount invested.  Where an investment is described as being likely to yield income, please note that the amount of income that the investor will receive from such an investment may fluctuate.  Where an investment or security is denominated in a different currency to the investor's currency of reference, changes in rates of exchange may have an adverse effect on the value, price or income of or from that investment to the investor.

Tuesday, July 10, 2018

3Q Rebalance – ETF Global® Dynamic Model Portfolios

Tuesday, July 10, 2018 - Investor anxiety may have been running high at the end of the first quarter, the S&P 500 had dropped into the red and closed below its 200-day moving average, but ultimately those who stayed invested were well rewarded in the second quarter as the economic good news kept coming. Equities in general managed solid single digit returns that lifted markets above their starting line for 2018 although weakness in late June robbed them of some of their hard-won gains and new anxieties have emerged as we start the third quarter. Can the strong economic growth continue?  Will the incipient trade war grow out of control?

For us at ETF Global, the start of a new quarter means something much more concrete; that it’s time to revisit the ETFG Dynamic Model Portfolios. The 4 base portfolios and the 8 “tilts” were updated on July 2nd and the wide performance differences between different sectors and style boxes are having a major impact on the models. Both the domestic and international sleeves saw significant changes with three funds leaving each with only the emerging market portfolio staying the same with both the iShares MSCI Emerging Markets ETF (EEM) and First Trust Chindia ETF (FNI) being retained for another quarter.

Among the domestic funds, only the Direxion NASDAQ 100 Equal Weighted Fund (QQQE) holds onto its spot in the line-up once again where it’s joined by the SPDR S&P 400 Mid Cap Value ETF (MDYV), the SPDR S&P 600 Small Cap Value ETF (SLYV), and the SPDR S&P 600 Small Cap ETF (SLY) while the SPDR Portfolio S&P 500 Growth ETF (SPYG), SPDR Portfolio S&P 500 Value ETF (SPYV) and WisdomTree U.S. MidCap Dividend Fund (DON) depart the strategy. The result is the domestic portfolio has seen a substantial reduction in its average weighted market cap while the pendulum between value and growth has shifted towards the middle ground as financials gain more exposure at the expense of tech stocks.

The shift in the portfolio is easier to understand when you consider that large cap equities may have struggled to hold onto their gains last quarter, but their small-cap brethren had no such issues with SLY up over 9% while the iShares Russell 2000 ETF (IWM) was up nearly 8%. That strong momentum was one of the driving forces that propelled a number of funds focused on smaller names up our list of top Quant funds although we should note that all four of the domestic funds have excellent fundamental scores as well. In fact, while the three additions to the portfolio have seen an increase in short-term momentum which lifted their aggregate score, their sentiment scores were substantially higher with each having high implied volatility and short interest. Compare that with SPYG and SPYV which have seen a steady drop in their behavioral scores as large caps continue to lose ground to smaller names.

U.S. equities generally had a solid quarter, the winners on the international side in the second quarter were those were those who lost the least as emerging market stocks continued to be hit by Fed fears while trade war talk hurt even the developed markets. That helped drive a major shift in the international side of the portfolio as it reduced Asian exposure to a more European orientation thanks to the departure of the two broad funds, the iShares Core MSCI Pacific ETF (IPAC) and iShares Edge MSCI Multifactor Intl ETF (INTF) along with one of the country specific funds, the iShares MSCI Singapore ETF (EWS). Taking their place are the iShares Core MSCI International Developed Markets ETF (IDEV) and Goldman Sachs Active Beta International Equity ETF (GSIE) along with the iShares MSCI United Kingdom Fund (EWU) where the Brexit debate continues to weigh on valuations while helping boost its sentiment scores.

You can find an overview and performance information for the ETF Global Dynamic Model Portfolios at http://www.etfg.com/about-model-portfolios

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