Monday, November 27, 2017 - U.S. Equities’ record-setting year continued this week, as the major indices soared to new highs in a holiday-shortened week. Despite being confronted with a hung government in Germany, mixed economic data, persistent below-target inflation, further flattening of the yield curve and the announced resignation of Janet Yellen from the Fed Board of Governors, investor enthusiasm for equities remained unabated. This upbeat outlook is underpinned by the conviction that a strengthening domestic economy, synchronized global growth, rising corporate profits and the prospect of a tax overhaul, provide a supportive backdrop to extend this year's rally even further.
Small-Cap stocks led the way in this week's gains after being lifted by the passage of the House version of the tax bill. The tech-heavy Nasdaq composite performed similarly well with the familiar FAANG contingent leading the way. Consumer discretionary stocks also provided a boost amid positive forecasts for Black Friday and holiday season shopping. At week's end, the Russell 2000 was up 1.9%, along with 0.9% and 1.6% advances for the DJIA and Nasdaq. The S&P 500 rose 0.9%, setting another 100 point milestone as it crossed the 2,600 mark on Friday.
ETFG Equity Exposure ReportM&A activity in the fast-consolidating semiconductor industry was in focus this past week, following the news of Broadcom's unsolicited $130 billion bid to acquire Qualcomm and Marvell's $6 billion acquisition of rival Cavium. Through our equity exposure report, you can track ETPs that will be potentially be effected by corporate actions, like M&A activity and other events that have a material impact on either the composition or performance of an ETP from the constituent level. While Qualcomm rejected Broadcom's initial overtures, it will be worth monitoring going forward as Broadcom is reportedly considering upping its already record-breaking offer. Looking at our equity exposure report, we can see that 182 and 105 ETPs hold Qualcomm and Broadcom respectively. The iShares PHLX Semiconductor ETF (SOXX) is the ETF that devotes the largest weighting to both companies at 8.72% and 7.31%.
Marvell's pending acquisition of Cavium has the potential to impact the as many as 130 of the combined ETPs that hold both companies as constituents. The funds with the most exposure to Marvel are the SPDR S&P Semiconductor ETF (XSD), Powershares Dynamic Semiconductors Portfolio (PSI), and First Trust Nasdaq Smartphone Index Fund (FONE) with 3.59%, 3.31%, 2.39% weightings. Cavium's largest exposures reside in the SPDR S&P Semiconductor ETF (XSD), PowerShares Russell Midcap Pure Growth Portfolio (PXMG) and First Trust Nasdaq Semiconductor ETF (FTXL) with 3.78%, 1.9%, and 1.77% weightings.
As always, when assessing the potential impact a merger will have on a given ETP, it is important to review a fund's weighting methodology and selection criteria.
Thank you for reading ETF Global Perspectives!
ETFG 21 Day Free Trial: https://www.etfg.com/signup/quick
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.