Monday, August 21,
2017 - Stock indexes were on the road to recovery last week and then sold
off when the President’s comments on the previous week’s violent protests
appeared to justify the actions of the “very fine people” of the Alt Right in
Charlottesville. Such praise of particular groups has been off limits for
traditional politicians for decades. The comments further caught GOP members
off guard in what typically would be the slow dog days of summer as public
opinion reaction gathered momentum leading to business leaders abandoning
Advisory Boards. Culminating the week was the surprise resignation of Trump’s
senior political advisor and campaign strategist, Steve Bannon. New terrorist
attacks in Spain, and concerns regarding future actions by the Federal Reserve
and the European Central Bank added fuel to the turmoil. While presidential
decrees reducing government regulations continue to be issued by POTUS,
investors increasingly question if big ticket items like tax cuts,
infrastructure spending and health care reforms can be accomplished in this
politically charged environment.
US Benchmarks ended down with the S&P 500 closing down
.65% for the week to 2,425.55 and the Russell 2000 dropping 1.20% to 1,357.79. The
tech heavy Nasdaq Composite dropped in line with the S&P 500 by a minus
.64% to 6216.53. Nevertheless the equity markets remain resilient despite
increasingly political uncertainty in Washington.
One thing we found of interest was the Rise of the
Benchmark (Indexes) as show in the graph below. Due to the rise of ETFs, cheap internet
trading and the decline of the number of publicly traded firms, indexes now outnumber
publicly listed companies! It seems to
us that the consequences of this are little known which is why astute investors
are wise to note the particularities of
the construction of the indexes that serve as the portfolio of the ETFs that
they trade – something that we here at ETFG have been saying for some time
and plan to provide you with more information on this soon. Indexes on, for example. a particular theme
or sector can vary considerably.
Nevertheless , we continue to favor the Reflation trade
continue to believe that the animal spirits unleashed by the excitement of the
GOP denominating the WH, Congress and Senate are alive and we would not leave
the party yet, although some caution is warranted. The continued decline of the
USD off its highs since December could give investors with foreign ETFs a
double reward, rising equity prices and a FX kicker as well.
Our Quant Score list shows several of the weekly movers
are funds focusing dividends: SDY, JHDG,
SDIV, FPE, and IQDE. Our Equity Select
List shows ETFs with scores of 70 or better to have an overseas flavor: FNI, EWY, PGI, EWH, FXI, EWU, EDOM and
AADR. This indicates that value has
shifted to overseas markets from well performing US markets. Energy and Tech ETFs continue to score high
as evidenced by CRAK, OIH and TCHF, KWEB, & XITR.
We suggest looking over the Quant Movers Daily and Weekly
% Movers to zero in on attractive plays and sudden changes in our ratings
outlook.
Thank you for reading ETF Global Perspectives.
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