Columbus Day & the New Normal Continues

Monday, October 9, 2017 - The new normal continued last week with major indices hitting record highs as the Dow gained 368.58 points, or 1.6%, to 22,773.67, the Nasdaq gained 1.5% to 6,590.18, a record high, while the Standard & Poor’s 500 index, which hit a record high on Thursday, rose 1.2% to 2,549.33.

This all happened while political uncertainty continued to rise including a horrific act of violence against concert goers in Las Vegas. The VIX index, which is used to measure the fear of investors, continued to hit record lows. Wall Street even shook off a weaker than expected jobs report, mainly placing blame on the two devastating hurricanes that hit the nation, on the drop in payroll numbers.

In ETFs, some of the biggest news included the potential relaxing of restrictions around custom baskets. If granted, “the applications, would permit index ETFs, including what are commonly referred to as “self-indexed” ETFs, substantially more flexibility to customize their baskets”. More specifically, the ETFs could sell and redeem creation units using different baskets, neither of which is a pro rata slice of the portfolio (generically, “Custom Baskets”); provided that the ETF’s Board, including a majority of its independent directors, approves it as being in the best interest of the ETF written policies and procedures detailing.”

In our ETFG Quant Movers, we saw a shift out of multi-national ETFs and gains in single-nation tracking funds. Losers included the Columbia Sustainable International Equity Income ETF (ESGN), iShares Global Timber & Forestry ETF (WOOD) and ProShares MSCI Europe Dividend Growers ETF (EUDV) which lost, 7.39 7.23 and 6.89 points to their overall scores respectively. Gainers included the WisdomTree India Earnings Fund (EPI), Guggenheim U.S. Large Cap Optimized Volatility ETF (OVLC) and the iShares MSCI Chile Capped ETF (ECH), which all added 10.49, 9.30 and 9.13 points to their overall scores respectively.

Our ETFG Select List saw some of the biggest changes in the large-cap strategy portion of the list with only one name remaining from last week, the Direxion Nasdaq 100 Equal Weighted Index Shares (QQQE). The new additions to the section were the Guggenheim U.S. Large Cap Optimized Volatility ETF (OVLC), also the second highest Quant gainer, the First Trust Dorsey Wright Peoples Portfolio ETF (DWPP), the Guggenheim S&P 100 Equal Weight ETF (OEW) and the Schwab Fundamental Emerging Markets Large Company Index ETF (FNDE).

We will see if the markets can continue on their high rising streaks throughout a month that has historically set some new trends, such as the end of the tech bubble bear market in 2002, the end of the bull market in 2007 and end of the 2011 bear market.

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