Monday, November 28, 2016

Surprise Beneficiaries

Monday November 28, 2016 – the year 2016 has surely been one for the books as the unexpected basically became the norm throughout the last 11 months. No one at this time last year expected Brexit to be possible, Donald Trump to be President-elect or the stock market to go anywhere but down – surprise, surprise.

Yet again this week we saw record highs in all the major U.S. indexes, but this time it was on the same day. That’s something we haven’t seen since the last day of the 20th century. Riding that wave has been U.S. Equity Exchange-Traded-Funds which saw over $48B of inflows in the past 30 days according to the ETFG Fund Flow Report.

One fund which is reaping the benefits of the market highs and the plans of President-elect Trump is Financial Select Sector SPDRS (XLF) which has seen well over $3B of inflows just last week – all a direct expectation of steady interest rate rises and a bulk up in spending on infrastructure which will give banks more opportunities to lend and more importantly, make better gains on the money they are handing out. The fund is up almost 14% through the month of November and closed Friday at $22.41. It currently holds a “C” rating in the ETFG Quant Score.

With the Holiday season now in full swing, retail and consumer discretionary ETFs are also catching the eyes of some investors. The PowerShares Dynamic Retail Portfolio (PMR) reached levels it hasn’t seen since December of last year as it closed on Friday at $37.41. The index is comprised of 30 U.S. retailers and is currently up $3.32 MTD. It will be interesting to see this week how Cyber Monday plays out for online retailers as it is expected to be the biggest online shopping day in U.S. history.

But as the year continues to wind down we will see if these two trends will be able to hold up steam. For now, investors who were willing to buckle up and leave their money in the market are enjoying an early holiday present but the well-informed ones must always be wary of a Grinch that may be lurking in the distance.

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