Monday, June 12, 2017

Dawn of the DOL Rule

Monday, June 12, 2017 - Another week packed with political uncertainty throughout the world. Former FBI Director James Comey testified in front of congress after his dismissal from the position by President Donald Trump. Attorney General Jeff Sessions came under increasing fire for the Russian meddling claims and in the UK, Theresa May did not get the majority vote to keep the conservative party in control.

All of this news somehow overshadowed the start of a program that will create a paradigm shift for those who work on Wall Street. Last Friday, the first phase of the DOL rule went into effect which will now require brokers to create investment portfolios in the best interest of their clients. Though still under review and not going into full effect until January 1st of 2018, this rule is intended to define how brokers interact with their clients.

The markets mostly shoved off the political uncertainties with the S&P 500 finishing down only 4 points for the week and the Dow Jones finishing up about 90 points settling at 21,271. That was not the case however for Nasdaq and the overall tech sector in general. Late Friday afternoon the Nasdaq started to fall off, losing about 1.8% or 113.85 with the big names such as Facebook, Apple, Microsoft and Google accounting for most of the loses.

This caused the technology sector ETFs to subsequently fall off such as The Technology Select Sector SPDR Fund (XLK) which lost 1.42 points on Friday or 2.47% finishing at $56.02. Same goes for the First Trust NASDAQ-100 Technology Sector Index Fund (QTEC). It lost 2.40 points and subsequently closed at 64.40 or down 3.59%.

Our ETFG Quant Model however sees this slip up as a buying opportunity for the Tech Sector Funds. The highest rated fund in our daily updated reward scoring system is the Direxion NASDAQ-100 Equal Weighted Index Shares (QQQE). It comes in with a highly rated fundamental score with its P/E, P/CF and P/B all over 99 points out of 100. In our model that means that compared to the history of the fund, it is looking extremely cheap at the price it is currently trading at right now.

In our Quant Movers model we see some of the political uncertainties over seas hurting the scores of some international ETFs. The top two losers last week were the iShares Edge MSCI Min Vol Europe ETF (EUMV) and the WisdomTree Europe Dividend Growth Fund (EUDG) both losing 8.34 and 7.41 points to their overall scores respectively. They both are currently graded as “C.”

Let’s see what next week brings for the market but if the past is any indication of the future, who knows what will happen. A few things that are for sure, the Federal Reserve will come out with their next decision on a rate hike on Wednesday along with the Monthly Producer Price Index data and the Consumer Price Index data coming out on Tuesday and Wednesday. This will surely be watched closely by market participants and can be a true gauge the current health of the overall economy.

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