Tuesday, February 21, 2017

The Political Noise and Market Drums Beat On

Another week, another notch put in the major U.S. indexes’ belts. Yes, though this is the month of Groundhog Day, we are not just repeating the past as the Dow, S&P and Nasdaq all reached new milestones with the close of the market Friday. This continued growth could give thanks to strong economic data and Fed Chairwoman Janet Yellen who spoke in front of congress on February 14th and 15th. Fed Chairwoman Yellen’s remarks reflected that the growth of the U.S. economy would continue at a moderate rate and that the outlook was surely getting better.

That sent the Dow to record levels which of course was welcomed by those invested in the $17B SPDR Dow Jones Industrial Average ETF (DIA). The ETF hit its highest level ever on Thursday closing at 206.48. Same goes for SPY that closed Friday at 235.09 and QQQ which closed at 129.81 on the same day, both at record highs.

Although those funds may be preforming great, our ETFG Quant Movers paints a different landscape of where investors may find Alpha. Last week, iShares Edge MSCI Intl Size Factor ETF (ISZE), Deutsche X-trackers MSCI EAFE High Dividend Yield Hedged Equity ETF (HDEF) and SPDR MSCI China A Shares IMI ETF (XINA) had the most positive movement in the scoring model. They gained 18.17, 12.17 and 11.01 points and sport grades of B, B and C respectively in the ETFG Quant Model. All three funds have heavy international exposure.

On the opposite end of the scoring spectrum, triple levered products led the way again last week as being the riskiest. In fact, they were the same ETPs as last week, those being GASL, LBJ, GASX and ERX. This week they carry Red Diamond Risk Scores at 10, 9.39, 9.36 and 9.09 respectively.

Niche funds continue to find their way into the market. Global X just launched the Founder Run company ETF (BOSS) last Wednesday. This ETF tracks the Solactive U.S. Founders-Run Companies Index and is intended to track U.S. Large and Mid-cap companies where the CEO is also the Founder. BOSS is equally weighted and holds positions in companies such as Nvidia, Grubhub and Netflix.

Though the political spectrum seems divided more than ever, one would think it fell on the market’s deaf ears as they continue to go higher. We will see if they can continue their hot streak this week as the Fed minutes from the January 31st-February 1st meetings are going to be released along with January sales of newly built homes. Of course, all that news would be Trumped if our new President releases any more detail on his faster-than-expected tax reform plans.

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