As a Matter of Factor

Friday, September 29, 2017 - the below is a contributed post by Dan Carlucci, member of the ETF Global Research Advisory Board

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Assets in smart-beta strategies have reached a record $607B globally, with $539B in US strategies. Typically, smart-beta strategies are rules-based strategies that exploit an inefficiency in the market or a factor which has historically produced returns over the benchmark return.  Examples of smart-beta strategies include factor ETFs such as value, momentum and quality. Other popular strategies include low-volatility and dividend-based strategies. With the rise in popularity of such strategies, it is prudent for investors to really understand the nature of the strategy that they are buying. It is important for investors to understand the economic rationale behind the strategy and its payoff structure. Factor-based strategies, while adding value, may take time to pay off, may exhibit volatility and may underperform in certain market or economic environments. As with any other investment, individuals should understand the product that they are buying so that there are no nasty surprises.

Beware of data mining. There should be a clear, plausible reason that a strategy has produced excess return in the past and for investors to believe that it will continue to perform well. Data can be analyzed ad nauseum and spurious correlation can be found among many factors. For example, in a paper on data mining, Dr. David Leinweber found that the factor with the highest correlation, or ability to predict returns, in the S&P 500 was butter product in Bangladesh. He described this type of data analysis as “torturing the data until it screams.” I can think of no reason that this statistic should have worked in the past nor why it should predict market performance in the future. Therefore, it would not make sense to invest in a strategy which used this as a basis for its strategy. On the other hand, strategies based on factors such as valuation – belief that inexpensively priced assets tend to outperform more expensive assets – have sound reasons for outperforming. There are risk-based as well as behavioral based explanations. There are also sound reasons for other strategies such as quality and momentum to perform well. What is important when evaluating factor-based strategies is to understand the reason that a strategy has done well and to have confidence that it will continue to add value.

How do you define the factor?  Once you decide that a specific factor has investment merit, it is important to understand that there is no standard definition for that factor. For example, while value tries to identify underpriced assets, there are many definitions of value. Generally, value strategies start with price in the numerator. However, different items on a company’s financial statements can be used as a denominator. For example, price can be divided by earnings, book value, cash flow, sales, EBITDA, etc. For each metric, there is a rationale. While these various valuation factors are correlated, there may be differences in the magnitude of performance or when they pay off. For example, price to book value tends to be more closely associated with risk and tends to do better coming out of periods of extreme risk. With thinking about momentum, there are different time periods to consider – six months? 12 months?  12 months less the most recent month? There are many definitions of quality ranging from accruals to returns-based measures such as ROE or ROA.  This is not to advocate any particular factor over another, but merely highlights that it is important to understand how the factors is defined.

What is the payoff structure?  While many factors pay off over time, they do not pay off all of the time. Factors have specific pay off patterns, may perform well in certain economic or market regimes and not others, and experience extended periods of outperformance or underperformance.  Chart 1 below depicts the payoff of valuation and momentum over time.

Chart 1

This chart clearly shows that value and momentum have very different payoff patterns. In fact, their performance tends to be negatively correlated, e.g., when one outperforms, the other underperforms.  The correlation between these two factors is -.53.  The takeaway is that at times, a factor will underperform and that underperformance can be significant.  The underperformance may be significant and may last for an extended period of time. Chart 2 depicts the relative performance of valuation (Russell 3000 Value Index – Russell 3000 Index).

Chart 2

From the chart, you can see that value underperformed during the tech bubble, the financial crisis and for much of this year.

Another fact that stands out is that the performance of certain factors may be more volatile than that of other factors. Chart 1 shows that the performance of momentum is more volatile than that of value. In fact, the standard deviation for the performance of the value factor is 3.4 while that of the momentum factor is 7.1. Again, this is not to advocate one strategy over another. Rather, it is to highlight the importance of understanding the nature of the strategy in which you are investing. One way to mitigate the risk of an individual factor strategy is to invest in a multi-factor strategy.  Combining factors can help to smooth out the return stream.

In conclusion, smart-beta strategies are increasingly popular investment strategies. Owing to the outperformance of popular factor strategies and the low fees associated with the ETF wrapper through which many of these strategies are available, they will continue to grow in popularity and assets. As a result, investors should understand the economic rationale of the strategy, confirm that the strategy in which they are invested is consistent with their perception of the strategy, and understand the payoff structure of the strategy.  In this way, their expectation will be more reasonable and they will be less likely to be surprised or disappointed.

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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.

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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.

New Frontiers and Similar Challenges

Monday, September 25, 2017 - Amid a week that was headlined by the onset of the Federal Reserve's "quantitative tightening" and a sharp escalation of tensions between the nuclear-armed adversaries North Korea and the US, the S&P 500 and DJIA managed to eke out their second consecutive weekly gains. On Wednesday, the Federal Reserve announced that it would leave its benchmark interest rates unchanged, but left open the possibility of another rate hike before the end of the year. What's more, the Fed announced its plans to begin normalizing its $4.5 trillion balance sheet of treasuries and mortgage-backed securities in October. This marks an inflection point for investors, as the Fed's unprecedented bond-buying program has undergirded financial markets since the 2007-08 financial crisis and has helped buoy stock and bond markets to record highs. Investors and the Fed will now have to navigate uncharted waters, with there being nothing close to a historical precedent for this sort of large-scale balance sheet reduction.

Conditions in these uncharted waters got further turbulent for investors as a fiery exchange between the leaders of North Korea and the US raised the specter of military confrontation and, more ominously, nuclear war.  Despite this, stocks moves were largely muted as the major benchmarks traded within a tight range and remained at their historic highs. Attesting to the calm that has taken hold in the markets, the fear-gauging CBOE Volatility Index has fallen for nine of its last ten trading sessions and currently sits at record lows. The S&P 500 ended the week up less than 0.1%, while the DJIA advanced 0.4% and the Nasdaq shed 0.3%. This lack of volatility is yet another example of how desensitized the markets have become to geopolitical threats and political uncertainty.

Select List - The gains in the stock market this week were largely propelled by gains in the financial sector, which was buoyed by the FOMC's policy guidance and resultant prospect of a steeper yield curve. For those looking to benefit from the expected gains in financial shares in an environment of rising rates, we suggest monitoring the financial section of our weekly Select List. Currently, our quant model ranks the iShares Edge MSCI Multifactor Financials ETF (FNCF), First Trust Nasdaq Bank ETF (FTXO), Global X China Financials ETF (CHIX), PowerShares KBW High Dividend Yield Financial Portfolio (KBWD), and ProShares Global Listed Private Equity ETF (PEX) as the top five funds in this sector with the most attractive risk-reward profiles.

Conversely, stocks that have benefited from a low-rate environment were dragged down this week by the prospect of monetary tightening. For those looking to remain in interest-rate sensitive sectors, like utilities, here's the top five rated utilities funds by our model at the moment - iShares Edge MSCI Multifactor Utilities ETF (UTLF), John Hancock Multifactor Utilities ETF (JHMU), Reaves Utilities ETF (UTES), iShares Global Utilities ETF (JXI), and Utilities Select Sector SPDR Fund (XLU).

It will be quiet period in terms of economic news, as we enter the final week of the third quarter. US consumer confidence, new home sales, and durable goods readings, along with US and UK revised GDP figures will be the key economic events. Developments from the North Korea-US confrontation and health care and tax legislation in Congress will also be in focus.

Thank you for reading ETF Global Perspectives!

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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.

Persistent Resilience

Monday, September 18, 2017 - Resilience is probably the quality that best defines the current eight year bull market. Throughout this period, markets have contended with a steady stream of destabilizing events, ranging from escalating geopolitical conflicts to a slew of political, economic, and humanitarian crises. Yet, despite suffering temporary pullbacks, equities have continued to march upward and seemingly grow stronger with each passing headwind or crisis.

This resilience was strikingly on display this week, as equities rebounded from the previous week's decline and soared to record highs with the DJIA, S&P 500 and Nasdaq advancing 2.2%, 1.6% and 1.4% respectively. Investors began the week breathing a sigh of relief, as worst-case scenarios over Hurricane Irma's economic damage failed to materialize. As these fears, which had pressured stocks in previous week, abated, a relief rally took root that remained firmly in place for the whole week. The Dow posted it's biggest weekly gain of the year, with a stretch that included four consecutive record closes while the S&P 500 breached 2,500 and registered its best week since January.

However, several alarming events belied this record setting week. Tepid consumer spending data, economic fallout from two of the costliest and most destructive hurricanes in U.S. history, ongoing policy uncertainty in Washington, and continued North Korean saber-rattling and sharpening of tensions on the Korean peninsula were among the risks that cropped up this week. However, these seemingly inimical events to stock market gains and optimism were all largely shrugged of by investors. As this week's market action demonstrated, it will take a formidable matador to put an end to this bull market.

ETFG Quant Movers - This week's top Quant gainers include Vanguard Utilities ETF (VPU), Arrow QVM Equity Factor ETF (QVM), WisdomTree Japan Hedged Dividend Growth Fund (JHDG), PowerShares Preferred Portfolio (PGX), and Barclays ETN+ Shiller CAPETM ETN (CAPE) - their scores increased 11.45%, 10.98%, 10.14%, 9.96%, and 9.78% respectively. It's interesting to note that the iShares MSCI South Korea Capped ETF (EWY) currently ranks among our top rated funds according to our quant model. A closer look at EWY's score reveals that a large driver of this high rating is it's strong behavioral score - another illustration of the current disconnect between sentiment and risks in the markets.

On the opposite end of the spectrum, our top Quant losers were iPath S&P MLP ETN (IMLP), Vanguard Health Care ETF (VHT), ETRACS Linked to the Wells Fargo Business Development Company Index ETN (BDCS), Powershares Golden Dragon China Portfolio (PGJ), and ETFMG Prime Cyber Security ETF (HACK) - shedding 11.09%, 10.51%, 9.00%, 8.68%, and 8.33% each.

Looking to the week ahead, developments surrounding North Korea and the FOMC's decisions and outlook on the path of rate hikes and balance sheet reduction will be in focus and pose the next series of challenges to the current bull market.

Thank you for reading ETF Global Perspectives!

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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.

We Will Never Forget

Monday, September 11, 2017 - After two straight weeks of positive gains, stocks fell during the abbreviated holiday week. Financials dragged down the broader indexes as the worst performing sector losing -2.7%, followed by Technology and Consumer discretionary losing 1.28%, and 1%. It wasn’t all bad however as HealthCare, Energy and Utilities managed positive returns this week of 1.61%, 1.29% and 1.02%. Overall, the Dow Jones Industrial Average dropped by .9%, S&P 500 dropped by .6%, and NASDAQ dropped by 1.2%.

Most news this week was headlined by the aftermath of Hurricane Harvey and the ongoing warnings of Hurricane Irma who has arrived a week after Hurricane Harvey, which dropped a record 50 inches of rain along portions of the Texas Gulf Coast. The financial toll of these two storms could be several hundred billion dollars which of course doesn’t look promising for Property and Casualty Insurance companies.

In the ETF Global equity exposure report we can see how much of a Property & Casualty Company is held by various ETFs. As an example, let’s examine one of the bigger insurance companies, Allstate Corp. (ALL) to see its exposure within ETFs. $1.9B of Allstate is held within 144 ETFs, 1.9B and the ETFs that have the greatest exposure to Allstate are KBPW, Powershares KBW Property & Casualty Insurance Portfolio, which holds 8.04%, IAK, Ishares U.S Insurance ETF, which holds 5.04%, and RWW, Oppenheimer Financials Sector Revenue ETF, which holds 2.41%.

ETFG Quant Movers - This week in the ETF Global Quant Movers, the biggest gainers included SCIN, EGSHARES India Small Cap ETF, XTH, SPDR S&P Technology Hardware ETF, and SMEZ, SPDR EURO STOXX Small Cap ETF - their Quant scores increased by 20.71%, 19.64% and 19.1% respectively. On the flip side, the biggest losers in our quant score this week were AMZA, Infracap MLP ETF, ONEQ, Fidelity NASDAW Composite INDEX Tracking Stock ETF and BTAL Quant Shares US Market Neutral Anti-Beta Fund. Each fund lost 26.15% 19.19%, and 18.53% respectively.

ETFG Weekly Select List - With the short week, there wasn’t a lot of movement on the ETF Global Weekly Select List - 80% of number 1 ranked ETFs in their respective categories maintained their number 1 spot. However, in a week without a lot of variance, 2 Funds stood out:  XWEB, SPDR S&P Internet ETF, went from unranked to first in the Technology Category while ESGD, iShares MSCI EAFE ESG Select ETF, went from fourth to first this week in the Theme category.

ETF Fund Flows - With August behind us. we can look at the ETF Global Fund Flow tab to see which ETFs had the greatest inflows in August. Not surprisingly, the biggest inflows by dollar amount last month were SPY, IVV and VEA with inflows of 2.35B, 2.16B and 1.97B. In terms of percentages last month, the biggest inflows were HCRF, iShares EDGE Multifactor Healthcare ETF, HUSE, US Market Rotation Strategy ETF and Deutsche X-Trackers FTSE Developed ex US  Comprehensive Factor ETF with inflows of 180%, 117% and 115%.

Thank you for reading ETF Global Perspectives!

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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.

Back-to-School-Week

Tuesday, September 5, 2017 – this back-to-school week follows an eventful one given the arrival and aftermath of Hurricane Harvey in Houston and the news that North Korea launched a missile over Japan. As expected, energy stocks were greatly impacted and ended up .92% this week while Gas prices reached a 2 year high. Despite all of the above, some positive economic news helped the market move higher for the week.  Specifically, the GDP increased by 3% and the Employment Report reflected that the US added 156,000 jobs in August.

The Dow Jones Industrial Average finished up .8% for the week, the S&P 500 was up 1.4% and NASDAQ was up 2.7%. With Labor Day weekend, volume was down this week and we did see an increase in volatility. Healthcare and Technology were the top 2 performing sectors gaining 2.89% and 1.87%, while Financials and Utilities were the only sectors down for the week, .16% and .62% respectively. The tech sector was helped by the big tech firms, Facebook (FB), Amazon (AMZN) and Google (GOOG) having strong showings.

One of the biggest pieces of news this week was Gilead Science’s planned acquisition of Kite Pharma. The ETF Global ETF Exposure Report shows which ETFs have the most exposure to Gilead - there is roughly 6.2B of Gilead held in ETFs. The biggest holders of Gilead in terms of percentage of the fund are BBH, VanEck Vectors Biotech ETF, which holds 10%, IBB, ishares Nasdaq Biotech ETF and  BIB, Proshares Ultra Nasdaq Biotech ETF, both hold 7.92%.

The biggest movers in our ETF Global Quant Movers section were AMZA, Infracap MLP ETF, GURI  Global X Guru International Index ETF, FPE First Trust Preferred Securities and Income ETF as the biggest movers.  AMZA had an increase of 29.83% in their ETFG Quant score, GURI quant score by  28.32%, and FPE quant score increased by 27.3%   On the flip side this week the Biggest losers were  DES, WisdomTree Smallcap Dividend Fund, EWG Ishares MSCI Germany ETF, EWT ishares MSCI Taiwan Capped ETF. They lost 21.13%, 18.6% and 18.48% respectively.

ETFG Weekly Select List - This week on the ETF Global Select List, we had a few ETFs make the jump from the bottom of our top 5 in their respective categories and one ETF that made the jump from being unranked last week. QQQE, Direxion NASDAQ 100 Equal Weighted Index Shares, made the jump from unranked to number in 1 in the North American Category. While the following ETFs went from number 4 to 1 this week:  MLPA, Global X MLP ETF in the Energy category, XPH SPDR S&P Pharmaceuticals ETF in the HealthCare category and FCOM, Fidelity MSCI Telecommunication Services Index ETF in the telecommunications category.

We suggest always reviewing ETFG Quant Movers Daily % and the ETFG Weekly Select List when big events occur that affect financial markets to zero in on attractive plays and sudden changes in our ratings outlook.

Thank you for reading ETF Global Perspectives!

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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.