ETF Global

The broad US theme has become even more pronounced than we have seen all year. On Valentine’s Day we wrote about the three S&P 500 ETFs (SPY, IVV, and VOO) ranking in the top 15, today they are all in the top 10 joined by the Growth and Value versions of that index (IVW and IVE) in 2^nd and 9^th place.  Two broad Russell funds also make today’s’ top 10, the total market 3000 (IWV) ranks 3^rd and the large cap 1000 (IWB) finds itself tied at 9^th place followed closely by the small cap 2000 (IWM) in 12^th.  One result of this broad US concentration is the average Red Diamond Risk Rating of the top 10 has come back down below 4.

We were surprised to see the 2 bigger S&P 500 funds scoring above 4 Red Diamonds, the younger VOO gets a lower Risk Rating which will make more sense after reading that Valentine’s Day post.  The 7^th place iShares S&P 500 Index Fund (IVV) with 4.29 Red Diamonds and the 9^th place iShares Russell 1000 ETF (IWB) with 3.85 have similar inception dates in May 2000 so we wanted to compare the full Risk Ratings on each.  They are pretty close on the integrity measures with IVV scoring better with slightly lower scores in Structure, Liquidity and Efficiency.  With Risk, lower is better.  The country scores are even closer as both are entirely US focused so the tiny difference can be attributed to rounding.  It is the Volatility and Deviation scores that differentiate between upside and downside volatility and deviation separating the two.  Plotting both funds on the same price chart exposes little daylight from time to time but IWB wins out slightly which effects those measures and accounts for the Russell 1000’s lower overall Risk Rating.

Our Quant and Reward models predict relative performance not market direction and we have speculated that the low average Risk Ratings of the top rankers could be a cautionary signal.  So far it hasn’t meant that but the selections in the broad US market have kept you out of all the troubles overseas and the models say the US will continue to outperform.  Only time will tell if that outperformance comes on the upside or the downside.  Thank you for spending your time at ETF Global, we’ll be back tomorrow to close out the shortened week.