Rebounds from March Madness

Monday, April 3, 2017 - Following last week's stinging legislative defeat, it seemed that stocks were poised for declines. Failure to pass a healthcare overhaul exposed fault lines within the Republican party and cast the passage of market friendly legislation into doubt, given the inability of the GOP to coalesce around one of President Trump's signature campaign items.

Despite the current polarized political climate and its implications for the widely anticipated tax reform legislation, stocks staged a rebound this week, with all of the major averages eking out slight gains. Soaring consumer confidence, better than expected GDP growth and positive oil inventory reports exerted a countervailing influence on the healthcare setback and helped fuel this week's market gains.  The Dow Jones Industrial Average posted a modest 0.3% gain on the week, while the S&P 500 and NASDAQ fared slightly better, rising 0.8% and 1.4% respectively.

This week's rebound in the major averages help fuel inflows into several broad-based ETFs. According to our fund flow report, the SPDR S&P 500 ETF Trust (SPY) claimed the most inflows this week, adding over $1 billion in AUM. SPY was followed by iShares MSCI EAFE ETF (EFA), with $711 million in fresh assets as an improving global economic outlook has propelled international markets higher. Rising oil prices helped Energy Select Sector SPDR Fund (XLE) finish the week among the top ETF asset gatherers, as it received $470 million in creations.

ETFG Quant Movers: Our Quant Movers list this week underscores the surge in small business consumer confidence, revealed in the Michigan Consumer Sentiment Index update, as several small cap ETFs populate this week's top quant gainers. The WisdomTree SmallCap Dividend Fund (DES), Guggenheim S&P SmallCap 600 Equal Weight ETF (EWSC), and the WisdomTree US Smallcap Quality Dividend Growth Fund (DGRS) all finished in the top ten of this week's Quant Movers.

Conversely, the increasingly precarious health care outlook sent the Quant scores of several health care related ETFs sharply downward. The VanEck Vectors Pharmaceutical ETF (PPH), Health Care Select Sector SPDR Fund (XLV), and Vanguard Health Care Index Fund (VHT) all suffered sharp declines in their Quant scores and ranked among our top Quant losers this week.

During this upcoming week, market observers will pay close attention to the releases of several key economic data reports on vehicle sales, March jobs performance, and the Federal Reserve's March meeting minutes. Continued positivity in economic data could help counteract the rising political uncertainty and add further fuel to the post-election rally.

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