Monday, October 31, 2016

Campaign Trick & Earnings Treats

Monday, October 31, 2016 - Sometimes, things may not be as bad as they seem, at least on paper.

As the Presidential debate entered into the home stretch with yet another unanticipated twist, last week has shown that the U.S. economy experienced mostly better-than-expected corporate earnings and even more to the surprise of investors, a .04% higher tick than consensus on the GDP growth (2.9% versus consensus of 2.5%). The surprise comes in welcoming fashion as concerns over U.S. growth have plagued markets for quite some time.

We also saw that American consumers are helping to drive the GDP to its highest number in 2 years. That is something that may make consumer discretionary ETFs like Fidelity MSCI Consumer Discretionary Index ETF (FDIS) or Consumer Discretionary Select Sector SPDR Fund (XLY), look more attractive in the coming months.

Although there was some good news for U.S. equities this week, not all reported great earnings which is why XLY and FDIS did not bode as well as one would think with the positive GDP news on Friday. Amazon was just above $818 a share on October 27th before they reported earnings after the bell, but, a miss in earnings sent the stock down to just above $776 by the close of the market on Friday. That hurt FDIS and XLY which both hold Amazon (AMZN) as their highest positions in the ETFs at 11.38% and 13.99% respectively, according to ETF Global’s constituent data reports.

Switching gears, health care ETFs dominated the ETFG Quant Movers this week as 4 of the 8 top gainers were all related to that industry. Of those health care ETFs, the Van Eck Vectors Pharmaceutical ETF (PPH) was the biggest gainer moving its score up to 65.34 with a 13.76 positive change. PPH carries an 8 diamond ETFG reward and has an overall “B” grade in the ETFG Quant Model.

With the final week of the Presidential election upon us and a reopening of the Clinton email investigation, this week sets up to be one for the ages.

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