Tuesday, September 6, 2016

Emerging Markets Leaders & Followers

What’s your plan for tomorrow, Are you a leader or will you follow” - The Interrupters

During one of my many trips in the car over this holiday weekend, I came across “Take Back the Power” by The Interrupters while flipping through the stations on Sirius XM.  As the song played, the lyrics got me thinking about a few things, one in particular is how true that is in the financial markets. Most strategies used today can be grouped into mean reversion or trend following. While the definitions and inputs may vary, the theory is the same.

By sorting the ETF Global® Quant model by any of the individual factor scores, it’s easy to see who the leaders and followers are in the ETP world.  If you click twice on the “LT” header under Technical, the column sorts by the Long-Term technical factor with the highest scoring products at the top. This factor is heavily influenced by long-term momentum, which is used in a lot of trend following strategies.

There are a lot of different products in the top 10 or so products such as PureFunds ISE Big Data ETF (BIGD) and the First Trust Indxx Global Agriculture ETF (FTAG), but it’s easy to see a trend emerge among some of the top scoring products as many focus on Emerging Markets. The JPMorgan Diversified Return EM ETF (JPEM), EGShares EM Core ex-China (XCEM) and ironically the PowerShares S&P EM Momentum (EEMO) all have very high momentum scores.  Given the climb by Emerging Markets during this year, this shouldn’t be a surprise to anyone.

If you click on the “LT” header again, the list is now sorted in ascending order. By looking at both the Long-Term (LT) score and the Short-Term (ST) score, you can see which products have potentially turned the corner after having a bad run. The key is to find products that have low long-term scores with high short-term scores.

The raw list is an eclectic group but by focusing on those that have a short-term score above 50 you will see that there are a number of hedged products in the group including the WisdomTree Korea Hedged Equity (DXKW), Deutsche X-Trackers MSCI United Kingdom Hedged Equity (DBUK) and Deutsche X-Trackers MSCI Brazil Hedged Equity (DBBR) ETFs.  Are these the new Leaders of tomorrow or are they just getting whipped around by currency markets over the comments out of the FED recently?  Only time will tell but they may have taken the first steps needed to walk that path.

We hope that everyone enjoyed their long Holiday weekend and thank you for reading 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.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.