Friday, April 26, 2013

Yesterday’s Bloomberg story about central banks buying equities explains much.   Having 12% of the Swiss National Bank’s assets going into broad market ETFs would account for the dominance of US broad market funds this year, and that’s just one example in the report.  We are glad our models picked up on the trend before it was known as those are the funds that have dominated our ranks all year.  Within those ranks there are always plenty of other regions and sectors and having looked at the former Tuesday, we’ll look at the sectors today.

Energy is Quant’s favorite sector today with 9 funds in the top 100, 5 of which rank 11th or better.  The Vanguard Energy Sector Fund (VDE) is best at 4th place with an 8.22 Reward Rating and XLE and XOP are close behind.  There are also 9 basic materials funds in the group led by the 20th place Market Vectors-Agribusiness Fund with the unforgettable ticker MOO.  The Global X Silver Miners Fund (SIL) does better in the Diamond model with an 8.09 Green Diamond Reward Rating.  Three PowerShares funds are among the 6 from the industrial sector with PSCI in 20th place but PRN gets a better Reward Rating of 8.23.  Two technology funds make today’s top 10, IYW and SOXX in 9th and 10th, and three others make the top 100.  There are also 5 health care funds, three of which are biotech, like 44th place PBE with an 8.16 Reward Rating.  Quant has yet to embrace the consumer sectors this year despite their good performance but we do see 3 staples funds and 2 discretionary with 37th place IYK leading the former and 52nd place XRT the latter, both are 7 Green Diamond funds.  Similar story with financials but yesterday’s KBWI is still in 5th place with a 9.63 Reward Rating and XLF also makes the top 100 at 69th place and 7.32 Green Diamonds.  The telecomm sector gets one fund in today’s top 100, Vanguard’s VOX in 67th place which is better than Quant’s least loved sector today, the utilities with XLU  the highest ranking at 162nd and a 6.21 Reward Rating.  Those are two tough sectors in a risk on world.

The central bank news not only confirms a source of the huge asset flows, it also confirms the validity of ETFs as a security type to gain exposure to the asset classes you need.  Financial repression from unprecedented monetary policy has rendered so many models obsolete but not ours.  ETF Global’s predictive quantitative models have been favoring US broad market funds all year but favored Europe and emerging markets at the right times last year.  We are waiting for the next turn and will keep you posted.  Thanks for reading and have a nice weekend.

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