Monday, May 22, 2017

Sharp Twists and Turns

Monday, May 22, 2017 - The placid environment that has prevailed in the markets for much of the year came to an abrupt end this week, as an onslaught of political turmoil in Washington and abroad shattered market complacency and gave rise to fresh volatility. We began the week amid the fallout of Friday's unprecedented multinational cyberattack that infected nearly 300,000 computers in 150 countries. This large-scale ransomware attack, known as "WannaCry", paralyzed businesses and governmental organizations across the globe and raised broader questions about the vulnerability of existing cybersecurity infrastructure and the specter of future, more debilitating attacks. With these concerns percolating into the consciousness of investors, market uncertainty was compounded by the surprise dismissal of James Comey and new allegations that President Trump leaked sensitive intelligence to top Russian diplomats and had requested then FBI Director Comey to drop his investigation into former national security adviser Michael Flynn.

These revelations fueled the already escalating concerns of collusion between Trump and Russia and cast further doubt on the ability of our administration to pass its pro-growth agenda through Congress. In response to Trump's eroding political capital, treasury yields declined sharply, the dollar slid to a six month low, and S&P 500 suffered its worst single-day decline in eight months, shedding 1.8% on Wednesday. While markets stabilized somewhat towards the end of the week, emerging markets were dealt a blow as yet another presidential corruption scandal began to unfold in Brazil. Following Friday's close, the S&P 500 and DJIA were down 0.4% for the week, followed by the NASDAQ 100 which lost 0.6%.

Quant Movers - As cybersecurity concerns were at the forefront of investors’ minds this week, cybersecurity-focused funds, like PureFunds ISE Cyber Security ETF (HACK) and First Trust NASDAQ Cybersecurity ETF (CIBR), received a surge of interest. HACK and CIBR each experienced over 50% increases in their behavioral scores according to our ETFG Quant model, making them some of the top movers in this category for the week. Conversely, sentiment soured on funds perceived to benefit from Trump's policy proposals of deregulation, tax cuts, and infrastructure spending. SPDR S&P Insurance ETF (KIE), Industrial Select Sector SPDR Fund (XLI)Vanguard Financials ETF (VFH), and iShares Transportation Average ETF (IYT) all suffered heavy declines in their behavioral scores. Lastly, our Quant model underscores the changing fortunes of emerging markets stocks, as Brazil's corruption scandal precipitated a massive selloff this week. iShares Core MSCI Emerging Markets ETF (IEMG) experienced the largest drop in its quant score this week, followed by iShares MSCI Brazil Small-Cap ETF (EWZS)iShares Emerging Markets Dividend ETF (DVYE)WisdomTree Emerging Markets SmallCap Dividend Fund (DGS), and PowerShares DWA Emerging Markets Momentum Portfolio (PIE).

Against a backdrop of heightening political uncertainty, volatility seems poised to return to the markets. We suggest reviewing the ETFG Red Diamond Risk and ETFG Green Diamond Reward ratings to help manage risk in your portfolio and zero in on funds that offer attractive risk-reward profiles.

Thank you for reading ETF Global Perspectives!

ETFG 21 Day Free Trial:

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.