Monday, August 10, 2020

New Parameters

Monday, August 10, 2020 -- Nearly 1.2 million Americans lost their jobs last week. In normal times, that figure may have resulted in big stock sell offs and emergency action from Congress. In the COVID-19 era, investors cheered the 7-figure weekly job loss as less dire than expected, even as lawmakers left Washington unable to agree on another round of stimulus.

All three major indices were up for the week, with the Dow Jones Industrial Average climbing 3.8%, while the S&P 500 and Nasdaq each gained 2.5%.

Prior to 2020, the record high for weekly unemployment claims was 695,000, way back in 1982. COVID-19 has thrown all that out the window. This week’s 1.2 million job losses were actually the fewest recorded since early March, continuing a modest recent trend of falling unemployment claims. In the prior week, 1.4 million Americans filed for unemployment. An estimated 30 million people are currently unemployed in the U.S. Nonetheless, Congress left for summer recess on Friday, without coming to an agreement on extending unemployment benefits or providing any other economic stimulus.

ETFG Quant Movers - The ETFs that had the largest weekly change in their respective, overall ETFG Quant ratings.

ETFG Quant Winners: This week, we highlight the biggest increases in the ETFG Quant Fundamental model. Topping the list are Global X SuperIncome Preferred ETF (SPFF), ETRACS Linked to the Wells Fargo Business Development Company Index ETN (BDCS), ETRACS Alerian MLP Index ETN (AMU), iPath S&P MLP ETN (IMLP), and iShares US Preferred Stock ETF (PFF).

ETFG Quant Losers: The ETFs with the biggest decreases in their ETFG Quant Fundamental Score this week were the Invesco Preferred ETF (PGX), VanEck Vectors Gaming ETF (BJK), SPDR Wells Fargo Preferred Stock ETF (PSK), ELEMENTS SPECTRUM ETN (EEH), and SPDR S&P Biotech ETF (XBI).

ETFG Weekly Select List - The five most highly rated ETFs per Sector, Geographic Region and Strategy as ranked by the ETFG Quant model.

The Energy Sector has charted strong growth in recent days. This week, we’re focusing on the 5 Energy ETFs with the highest ratings from our ETFG Quant model. They are: Alerian MLP ETF (AMLP), Invesco Dynamic Energy Exploration & Production ETF (PXE), VanEck Vectors Unconventional Oil & Gas ETF (FRAK), iShares U.S. Energy ETF (IYE), and Invesco Dynamic Oil & Gas Services ETF (PXJ).

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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.

Monday, August 3, 2020

Tech Leads the Way

Monday, August 3, 2020 – All three major indexes closed out July with a fourth straight month of gains, powered by the ever-growing influence of technology companies. Despite sharpening scrutiny over their size and influence, tech titans Apple, Facebook, Google and Amazon delivered another quarter of consensus-beating sales and profits. Their results and subsequent share price rises came after facing heavy criticism from Congress over their business practices and market dominance, once again affirming the resiliency of their operations and advantageous positioning as the pandemic-era accelerates our reliance on digital services.

Despite tech's stalwart performance, the economic picture remains decidedly mixed. Although the indexes finished with gains, this week's performance was choppy as the Fed issued another dour outlook, the U.S. experienced a record quarterly economic contraction, unemployment claims increased, coronavirus cases rose, non-tech earnings were gloomy and Congress failed to strike a follow-up coronavirus stimulus package before jobless benefits expired on Friday.

Facing this uneven economic backdrop, the DJIA, S&P 500 and Nasdaq ended the week down 0.2% and up 1.7% and 3.7% respectively. The key underpinnings of the market - monetary policy, corporate earnings and economic activity remain largely supportive for further market gains. Yet these gains are extremely tenuous and political uncertainties and the unabating coronavirus will render volatile market conditions for the foreseeable future.

ETFG Weekly Select List - The five most highly rated ETFs per Sector, Geographic Region and Strategy as ranked by the ETFG Quant model.

With the technology sector continuing to provide resiliency and market leadership, we'd like to feature their top-rated ETFs according to our Quant model. As of Friday, our highest rated technology ETFs are the ALPS Disruptive Technologies ETF (DTEC), First Trust Nasdaq Smartphone Index Fund (FONE), ETFMG Drone Economy Strategy ETF (IFLY), SPDR S&P Technology Hardware ETF (XTH) and Invesco S&P Equal Weight Technology ETF (RYT).

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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.

Monday, July 27, 2020

Busy Economic Landscape

Monday, July 27, 2020 – Stocks edged lower and long-term bond yields sunk to near record lows, as mounting economic and geopolitical worries spurred a broad risk-off rally this week. Sentiment was initially buoyed by a series of positive developments, namely a rebound in existing home sales, encouraging vaccine trial results and a historic EU fiscal stimulus program that will bring the member countries towards their deepest level of economic cooperation ever. Yet, this encouraging news, that briefly sent the S&P 500 into positive territory for 2020, was summarily snapped towards the end of the week.

On the economic front, U.S. initial jobless claims rose last week for the first time since March, raising fears that the emerging economic recovery could be in peril. These economic concerns were compounded by uncertainty over the renewal of U.S. fiscal stimulus, which has been integral to the stabilization and subsequent economic rebound since the rapid plummet towards recession in March. Critical relief measures from Congress's initial stimulus package, including unemployment benefits, small business loans, mortgage and rental forbearances are set to expire at the end of the July. With the coronavirus pandemic showing no signs of abating, the failure to extend these benefits could have a devastating impact on our economic rebound and general consumer sentiment. Adding to the downward pressure on market sentiment was the tit-for-tat closures of consulates in the U.S. and China. This follows a pattern of sharpening U.S.-Sino tensions, which raises another obstacle to the global economic recovery.

For the week, the DJIA, S&P, and Nasdaq shed 0.8%, 0.3%, and 1.3% respectively. This snapped two and three week winning streaks for the DJIA and S&P 500. Underscoring this week's risk-off rally, the U.S. 10 Treasury dropped to 0.58% and gold rose to a new record price of $1,897.50 a troy ounce.

ETFG Weekly Select List - The five most highly rated ETFs per Sector, Geographic Region and Strategy as ranked by the ETFG Quant model.

Given that the development of a COVID-19 vaccine currently wields an outsize influence on market sentiment, we'd like to highlight ETFs from the health care sector that our model currently favors. The following five 5, ranked 1-5 according to our model, could offer upside exposure towards COVID-19 therapeutics and vaccine progress - SPDR S&P Biotech ETF (XBI), Loncar Cancer Immunotherapy ETF (CNCR), iShares Nasdaq Biotechnology ETF (IBB), VanEck Vectors Biotech ETF (BBH), and VanEck Vectors Pharmaceutical ETF (PPH).

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.

Monday, July 20, 2020

Tech & Retail Drive Mixed Week Results

Monday, July 20, 2020 – U.S. equities finished the week mixed, squashing hopes of a three-peat for all major indexes to post weekly gains. The cause was a pullback in tech shares which bumped the Nasdaq into negative territory at -1.1%. However, U.S. retail shoppers provided some much needed momentum for a possible economic recovery, as reported on Thursday. This report showed that overall retail sales rose for the second month, exceeding expectations with a 7.5% increase in June. Unfortunately, this month’s spike in new U.S. coronavirus cases could weigh on July’s retail activity.

Looking at the sector break down, 7 of the 11 S&P 500 sectors finished in positive territory, with Utilities and Real Estate leading with strong gains. In earnings news, Netflix shares fell 6.5% after the streaming giant exceeded consensus revenue projections, but, presented disappointing forward guidance. For investors looking to diligence their exposure to stocks like Netflix can use the ETFG Equity Exposure Report which shows the concentration of individual equities within the universe of ETFs.

U.S.-listed ETPs saw approximately $12 billion of inflow for the week. The biggest winners on the top five list were SPDR S&P 500 ETF Trust (SPY), iShares Russell 2000 ETF (IWM), First Trust Capital Strength ETF (FTCS), Vanguard Total Bond Market ETF (BND) and Vanguard Total Stock Market ETF (VTI). SPDR S&P 500 ETF Trust (SPY) saw a huge net inflow of $3.3 billion while the remaining ETFs brought in approximately $2 billion, $1.1 billion, $725 million and $697 million in creations respectively. For outflows, the Invesco QQQ Trust (QQQ) led shedding $2.5 billion in AUM and Utilities Select Sector SPDR Fund (XLU) saw around $600 million in redemptions.

Looking ahead, earnings continues to take center stage, with approximately 20% of the S&P 500 companies reporting second-quarter stats. In addition, important economic data being released includes home sales on Wednesday and July's Purchasing Managers' Index (PMI) on Friday.

ETFG Quant Movers - Those ETFs who have had the largest weekly change in their respective, overall ETFG Quant ratings.

ETFG Quant Winners: The top five gainers in ETFG Quant Total Score were iPath S&P MLP ETN (IMLP), Innovator IBD ETF Leaders ETF (LDRS), Franklin FTSE Europe Hedged ETF (FLEH), Global X MSCI Super Dividend Emerging Markets ETF (SDEM), and AdvisorShares Vice ETF (ACT). Each ETP added approximately 10% to their overall ETFG Quant Total Score.

ETFG Quant Losers: Honorable mentions in the loser category were ELEMENTS SPECTRUM ETN (EEH), First Trust Preferred Securities and Income ETF (FPE), Schwab Fundamental Emerging Markets Large Company Index ETF (FNDE), iShares MSCI Finland ETF (EFNL) and SPDR Solactive Germany ETF (ZDEU). Each ETF lost around 10 points in Quant Total Score and the reasons for the drop can be traced to mostly behavioral factors.

ETFG Weekly Select List - The five most highly rated ETFs per Sector, Geographic Region and Strategy as ranked by the ETFG Quant model.

Considering the sector’s strong performance, we’d like to highlight the top ETFs within the Utilities sector in this week’s Select List. John Hancock Multifactor Utilities ETF (JHMU), Fidelity MSCI Utilities Index ETF (FUTY) and Invesco DWA Utilities Momentum ETF (PUI) each held on to the 1st, 2nd and 3rd place respectively. Utilities Select Sector SPDR Fund (XLU) and Invesco S&P 500 Equal Weight Utilities ETF (RYU) were the two newcomers to this week’s Select List claimed 4th and 5th respectively.

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.

Monday, July 13, 2020

China’s Bull for the Week

Monday, July 13, 2020 – Although investors might have expected a pause in the stock market last week with continuing COVID-19 concerns, the bull market rages on. Stocks jumped at the start of trading this past Monday, with many accrediting the bump to a front-page editorial in the China Securities Journal, which stated that “fostering a healthy bull market after the pandemic is now more important to the economy than ever.” When a state-run publication appears to endorse a rally in equities, people listen and by Friday, the large-cap CSI 300 Index and Shanghai Composite Index rallied 7.5% and 7.3%, respectively.

In the US, all major indices ended the week on a positive note as well, with the Dow Jones Industrial Average advancing 1.44%, the S&P 500 rose 1.05% and Nasdaq gained 0.66%. Small-Caps outperformed with the Russell 2000 adding 1.70%. Looking at the sector break down, 9 of the 11 closed higher. Financials led the pack gaining 3.44% and Health Care lagged with -0.24%.

U.S. listed ETPs saw approximately $7 billion of inflow which seems like a relatively quiet week these days. The biggest winners on the top five list were Invesco QQQ Trust (QQQ), iShares iBoxx USD Investment Grade Corporate Bond ETF (LQD), iShares Core U.S. Aggregate Bond ETF (AGG), SPDR Bloomberg Barclays High Yield Bond ETF (JNK) and iShares 20+ Year Treasury Bond ETF (TLT). Invesco QQQ Trust (QQQ) saw a $2.2 billion inflow while the remaining ETFs brought in approximately $1.2 billion, $815 million, $650 million and $620 million respectively. For outflows, the iShares Russell 2000 ETF (IWM) led shedding $1.9 billion in AUM and SPDR S&P 500 ETF Trust (SPY) saw around $1.5 billion in redemptions.

Looking ahead, the second quarter earnings season kicks off on Monday, with 8% of the S&P 500 constituents reporting earnings this week. In addition, important economic data being released includes Consumer Price Index (CPI) on Tuesday, retail sales on Thursday, and housing statistics begin on Friday.

ETFG Quant Movers - Those ETFs who have had the largest weekly change in their respective, overall ETFG Quant ratings.

ETFG Quant Winners: The top five gainers in their ETFG Quant Total Score were iPath S&P MLP ETN (IMLP), Innovator IBD ETF Leaders ETF (LDRS), Franklin FTSE Europe Hedged ETF (FLEH), Global X MSCI Super Dividend Emerging Markets ETF (SDEM), and AdvisorShares Vice ETF (ACT). Each ETP added approximately 10% to their overall ETFG Quant Total Score.

ETFG Quant Losers: Honorable mentions in the loser category were ELEMENTS SPECTRUM ETN (EEH), First Trust Preferred Securities and Income ETF (FPE), Schwab Fundamental Emerging Markets Large Company Index ETF (FNDE), iShares MSCI Finland ETF (EFNL) and SPDR Solactive Germany ETF (ZDEU). Each ETF lost around 15% in Quant Total Score and the reasons for the drop can be traced to mostly behavioral factors.

ETFG Weekly Select List - The five most highly rated ETFs per Sector, Geographic Region and Strategy as ranked by the ETFG Quant model.

Considering the sector’s potential bounce back from this week’s lack luster performance, we’d like to highlight the top ETFs within the Health Care sector in this week’s Select List. SPDR S&P Biotech ETF (XBI) held on the 1st place while iShares Nasdaq Biotechnology ETF (IBB) moved from 5th to claim the 2nd spot this week. John Hancock Multifactor Healthcare ETF (JHMH) held on the 3rd place and  KraneShares Emerging Markets Healthcare Index ETF (KMED) Fidelity MSCI Health Care Index ETF (FHLC) the two newcomers to this week’s Select List claimed 4th and 5th respectively.

Thank you 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.

Tuesday, July 7, 2020

3Q 2020 Rebalance - ETF Global Dynamic Model Portfolios

Tuesday, July 7, 2020 - The 3rd quarter update of our ETF Global Dynamic Model Portfolios, including all 4 of the base portfolios and the 8 “tilts,” was performed yesterday after the close of trading. While a rising tide of investor sentiment seemed to lift nearly all indices back to their pre-COVID highs, our ETFG Quant model continues to favor funds with a “smaller focus” for the third quarter.

This trend can clearly be seen in our domestic allocation, where the two funds with a large cap orientation - the ALPS Sector Dividend Dogs ETF (SDOG) and Invesco S&P 500 Pure Value ETF (RPV) - were replaced by the First Trust Small Cap Core AlphaDEX Fund (FYX) and WisdomTree U.S. SmallCap Fund (EES), respectively. Both funds were strong performers, especially RPV, which handily outperformed the Russell 1000 Value Index over the past three months. So why has the model shifted its favor to smaller-cap funds now?

In fact, the trend toward small-cap funds began some time ago, partly driven by their substantially higher fundamental scores relative to their larger peers. There’s no denying that the early stages of the COVID relief rally that began in late March favored larger stocks, with Apple, Amazon and Microsoft up from 32% to 50% in the last three months, pushing the price multiples for market-cap weighted, large-cap funds to new heights. The SPDR S&P 500 ETF (SPY) now trades with a trailing P/E ratio of 23.6x, in the upper third of its historical range, while the iShares S&P SmallCap 600 ETF (IJR) with a P/E of 14.93x, is close to the bottom of its own range.

Meanwhile, our ETFG Quant Behavioral scores have risen for smaller funds, thanks to an increase in momentum along with higher values for our contrarian sentiment indicators. Smaller-cap focused funds clearly underperformed until mid-May, but they began to outperform their larger peers as investors shifted their focus to undervalued names, but not “value” ones. Value, the style, has continued to underperform core and growth funds and the Quant model has shifted away from value toward more “core” products.

The domestic allocation isn’t the only part of our strategy impacted by the Quant models preference for smaller-cap funds, as both international sleeves have shifted toward funds with a lower average market cap. This can be clearly seen in two funds joining the allocation this quarter, the WisdomTree Japan SmallCap Dividend Fund (DFJ) and iShares Edge MSCI Multifactor Intl ETF (INTF). Investors not familiar with INTF, or suspicious of ETFs with ambiguous terms like “multifactor” in their name, should know that its portfolio typically focuses on not just smaller names, but those with a distinct bent toward the value and quality factors.

Nor is the focus on smaller stocks the only change in the international developed sleeve, as a shift toward dollar hedged products becomes more pronounced thanks to the addition of two new funds. First is the broad iShares Currency Hedged MSCI EAFE Small-Cap ETF (HSCZ) as well as the iShares Currency Hedged MSCI Germany ETF (HEWG). That shift might represent something of a head scratcher as many are convinced that a substantial decline in the U.S. dollar is imminent thanks to the explosion in the deficit and subsequent record Treasury issuance, but our Quant model is focusing on hard numbers instead. Specifically, that multiple hedged funds like HEWG are trading at substantially lower price multiples compared to their unhedged counterparts, making them much more attractive buys.

Finally, our emerging market allocation has been buffeted by the shift toward smaller names with the addition of WisdomTree Emerging Markets SmallCap Dividend Fund (DGS) and First Trust Emerging Markets Small Cap AlphaDEX Fund (FEMS) to the line-up. Both funds have been strong performers in the last three months thanks in part to a willingness to take a different approach than the larger iShares MSCI Emerging Markets ETF (EEM.) EEM currently has over 40% of its portfolio invested in mainland Chinese names while DGS and FEMS are both heavily overweighted in Taiwan where local stocks have been strong performers thanks to the country’s ability to limit the spread of COVID-19.

To learn more about our ETFG Model Portfolio strategy, please email us at sales@etfg.com or call us at (212) 223-ETFG (3834).

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

Thank you 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.

Monday, July 6, 2020

Markets Sailed Upward into July 4th Holiday

Monday, July 6, 2020 - We hope that all of our readers enjoyed a wonderful July 4th holiday as we salute our Armed Forces, Veterans and Front-Line Workers. We also encourage our readers to wear their masks when outside and observe social distancing guidelines. We will not know if folks practiced these guidelines in their July 4th celebrations for another 10 days or so—the time it takes for Covid-19 symptoms to become apparent.

Once again, US Investors entered last week on good news from Boeing on the MAX 737 tests getting underway and a huge surprise earnings report from FEDEX which pushed the markets higher. The week ended with a positive jobs report on Thursday which took the market to positive territory for an early close despite it becoming clear that efforts to contain the Coronavirus had failed in the Sunbelt States and threatened to extend regional lockdowns or worse.

US markets closed up last week with the S&P 500 finishing up 4.02% and the Nasdaq Composite up 4.62%. The broad market as measured by the S&P 500 closed the week at 3130.01. The NASDAQ Composite closed at an all-time high of 10,207.63. Despite these positive numbers, the market as measured by the S&P 500 just advanced 1.6% since June 2nd due to the competing themes narrating the markets between Covid spikes and Recovery Green shoots. The first half of 2020 will be epic in illustrating how a new strain of virus can upend the world economy, drive oil process to negative price levels and create social and political unrest. For the record, the S&P 500 finished the second quarter with the highest performance in the past 22 years.

As of early Monday morning, overseas markets are moving up quickly with the China CSI 300 Index moving up over 5% and European Stocks moving up over 2%. The Chinese Markets appear to be benefiting from recent government directives to accelerate the development of home-grown technology firms. The China Bull is pulling up regional markets including Hong Kong and Japan this morning.

European Markets are benefiting from a shift in Germany’s focus from being the balanced fiscal policy enforcer to a Save the Euro Zone at any cost from the economic devastation caused by the Coronavirus. There are a considerable number of ETFs in the US that allow focused plays on China and Europe. As a follow-up note to our comments on the future of the Big City, we note that Fujitsu announced today that it plans to cut its big city office space by 50% by 2022 by having workers stationed at remote locations i.e., work at home. Investors should take caution when investing in real estate ETFs to look under the hood at holdings and check our risk ratings on these ETFs.

All these issues got us thinking about seasonality, particularly that August, typically a month of mayhem, is fast approaching. We note that  John Kolovos at Macro Risk Advisors observed that the market tends to rally strongly from June 26 – July 11th…which it has so far.

Nevertheless, August is a mere 3 weeks away and we wish to remind our readers about historical observations about the month which falls into the Dog Days of Summer. August tends to be the worst month for stock returns in the past decade. Serious things that cause unexpected negative volatility happen in August.  For example:

·       The First Gulf War started in August 1990
·       The Asian Contagion began in August 1997
·       The Russian Debt Crisis started in August 1998
·       US Credit Ratings were downgraded in August 2011
·       China devalued the Yuan in August 2015
·       China again devalued the Yuan in August 2019

Last year, The Financial Times labelled 2019 the Summer of Fear.  This year with the invisible Coronavirus threatening a second round in the Fall, it could easily be labelled The Summer of Terror!

To best support the ETF selection process, the  ETFG Weekly Select List highlights the 5 most highly rated ETFs per Sector, Geographic Region and Strategy as ranked by the ETFG Quant model.

We suggest keeping 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!

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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.