Hazy, Hot and Humid

Monday. August 27. 2018 – Equity markets powered their way to gains last week as optimism over still-solid fundamentals outweighed the headline risks surrounding the latest political turmoil in Washington. The current bull market passed the 1990’s rally to become the longest on record, stretching more than 3,450 days. The broad market has more than quadrupled since the depths of the global financial crisis in March 2009. In related market news, Fed Chairman Powell’s comments from Jackson Hole last week supported the view that the U.S. Central Bank will continue to raise rates at a gradual pace, helping to extend the bull market. For the week, the DJIA was up 121.03 points, the S&P 500 climbed 24.56 points, while the NASDAQ Composite rose 129.65.

ETFG Quant Movers – those ETFs who have had the largest weekly change in their respective, overall ETFG Quant ratings:

ETFG Quant Winners: PIN (Invesco India ETF) jumped 11.13 points to 48.48, IEUR (iShares Cores MSCI Europe) rose 10.07 points to 63.35, NFTY (First Trust India NIFTY 50) climbed 9.91 points to 56.98, EWI (iShares MSCI Italy ETF) increased 9.45 points to 64.04, while SLX (VanEck Vectors Steel Index Fund) rounds out the top five with an 8.96 point increase moving to 51.34.

ETFG Quant Losers:  DLN (WisdomTree U.S. LargeCap Dividend Fund) dropped 9.34 points to 36.34, VBK (Vanguard Small-Cap Growth ETF) fell 8.58 points to 35.53, IWB (iShares Russell 1000 ETF) lost 7.76 points to move to 38.80, IPOS (Renaissance International IPO ETF) fell 6.95 points to 51.65, and ONEO (SPDR Russell 1000 Momentum Focus ETF) rounds out the largest five drops with a 6.85 point hit at 52.43.

ETFG Weekly Select List - the 5 most highly rated ETFs per Sector, Geographic Region and Strategy as ranked by the ETFG Quant model. We’d like to highlight some substantial movement in the Financials Sector portion when comparing this week’s Select List to last. KIE (SPDR S&P Insurance ETF) remains in the top spot in this week’s Select List while FTXO (First Trust Nasdaq Bank ETF) rose from the #3 spot to the #2 spot for this week. As we continue to keep an eye on this record-breaking bull run financially focused ETFs will continue to be an important indicator of the current state of the markets both domestically and abroad.

Thanks 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.

Climb Resumes as Markets Stabilize

Monday, August 20, 2018 – Last week began with investor concerns about potential contagion in the Turkish Lira and potential weakness in the US housing market. By midweek, investors refocused on strong corporate earnings and that the US economy is roaring ahead while much of the world is crawling along if not in downright recession. For example, the S&P 500 Index is up some 6.6% YTD while MSCI World Ex US Index is down almost 5%. MSCI Emerging Markets Index is down some 10% in USD. While fears of recession from trade wars capture news headlines, investors may be sensing that their fears may be overblown and as the US has the upper hand in such negotiations despite select regional industrial/agricultural pain. Indeed, it appears the US Market may be poised to continue its extended bull run.

US indexes ended the week mixed overall except for the heavy large cap weighted S&P 500 which closed at 2,850.13 and the broader NASDAQ Composite closing at 7,816.11 for a weekly move of plus .59% and minus .29 % respectively.

The discussion on the Turkish Lira continues, as well as, on other emerging market currencies that are likely to come under pressure thanks to our friends at Geopolitical Futures. The common thread here is that countries in the high to moderate risk categories have high USD debts both in the private and government sectors. The concern is that as the dollar stays high or moves higher against local currencies, these countries including the domestic private sector will not be able to service their debt thus leading to a default and potential banking crisis which could spread to creditors in the major countries.

Since these pressures take years to develop, it is unlikely that they will simply disappear but instead will hit in periodic waves. No doubt these concerns will be high on the discussion list at this week’s Central Bank Economic Symposium at Jackson Hole.

The chart below shows which countries are at most at risk. All of these countries have country ETFs that allow investors to play their view. TUR, ARGT, AGT, EZA, XINA, PKE, ASHR, FBZ, EIDO, and IDX are vehicles to keep an eye on. Be sure to avoid currency hedged funds so you get both the FX move and local market move --- presumably down. Check the prospectus or the ETFG Tear Sheets for this information. Note also in times of fast moving (and usually downward markets), these ETFs could temporarily halt creations and redemptions which could result in significant market price deviation from NAV.

Forgotten over the past 2 weeks was the 10-year anniversary of the Russo-Georgian War which began on August 7^th 2008. Concurrently, the US subprime mortgage crisis was picking up steam which lead to the Sept 15^th Lehman Bankruptcy. What is the significance of this for investors? It marked the beginning of the end of the post-Cold War international regime that dominated the world with notion of that free trade would rule the day and international institutions would dominate the nation-state.

Looking back, we see the awakening of the Russian Bear and its resurgence to act in its self-interest in regional conflicts around the Asia-Middle East region, as well as, a much more aggressive superpower eager to change the status quo.

At the same time, the world was entering a liquidity crunch and debt default period of US homeowners which weakened the global financial system which led to the Great Recession.   The prosperity brought by globalization of trade and money flows has come under fire by national populist movements as the distribution of the benefits of the regime was increasingly challenged as well as the very root of liberal democracies. This is setting the stage with the help of a more aggressive China to slowly start to chip away the at the dominance of the US Dollar and its global payment system which has allowed the US to exert considerable soft power over the decades.

Investor capital will increasingly find itself in a less welcoming world when journeying outside its national boundaries. Volatility is likely to return to FX markets which means prudence would dictate holding diverse assets.

We suggest keeping a mindful eye on tools like our Select List and Risk and Reward Ratings that can be used to evaluate the vast set of opportunities in the ETF marketplace. Today’s market realities require a new approach to macro investing, one in which individual investors now have access to tools via ETPs to customize risk and return profiles in their portfolios. Use our Scanner to find those funds.

Thanks 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.

Registration Now Open - Fall 2018 ETP Forum - Thursday, November 29th!

Friday, August 17, 2018 - We hope that you are all enjoying a wonderful summer!  ETF Global will again Chair the upcoming Fall 2018 ETP Forum on Thursday, November 29^th at The New York Athletic Club and registration is now open!

Topics will include:

• ETF Thought Leadership in Academia
• Will General Accounts of Insurance Companies lead ETF Growth?
• Investing for Yield with Rising Rates
• New-to-Market ETF Roundtable
• Smart Beta Reboot
• Artificial Intelligence in ETFs: A Flash or New Frontier?
• Around the Globe: Best Opportunities for 2019

This one day symposium convenes some of the most widely recognized experts in Exchange-Traded-Funds and the brightest minds in Capital Management.  The ETP Forum features renowned speakers addressing cutting-edge topics within a vibrant and intimate learning atmosphere.

• Register here:  http://etpforum.org/etp-forum/registration

• Video footage from previous ETP Forums: Expert Series TV

• All information will be available at www.etpforum.org

We look forward to seeing you there - thank you for reading ETF Global Perspectives!

____________________________________________________

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.

Foreign Currency Markets Steal the Show

Monday, August 13, 2018 - By Friday of last week, the Turkish Lira had taken the center show pushing aside interest rate, trade war and inflation concerns. The lira’s plummet led to a mild sell off across global equity markets. While policymakers talked down the significance of the effect of the lira crash, the situation worsened when the POTUS announced significant tariffs on imports of Turkish Steel and Aluminum. The European Central Bank met over the weekend to assess French, Italian and Spanish bank exposure to Turkish loans. The crash has continued into this morning with other emerging market currencies being dragged down. The lira is down over 44% year to date. Other countries running current account deficits are under pressure as well.  This is what a currency crash looks like thanks to our friends at Dow Jones.

As we warned investors on June 11^th, the canary in the coal mine was in our view Brazil’s stock market drop that week.  August tends to be a month with increased volatility and the one that currency crises tend to favor as noted below:

Recent Currency Crises of Significance

July 1997           Thai Bhat crisis and beginning of the Asian Contagion

August 1998      Russian Ruble and Debt crisis

August 2015      China Yuan devaluation and global market correction

August 2018      Turkish Lira plummets 23% in one week. 

We hope our readers brought a fully charged cell phone to the beach this weekend.

US indexes ended last week flat for the S&P 500 and the NASDAQ Composite with the indexes closing at 2,833.28 and 7,839.11 respectively for a weekly move of minus .25% and plus .35%.

A brief tour around the globe would raise some orange flags and red flags for some emerging market investors. The usual concerns of rising US interest rates, inflation and increasing trade tensions were eclipsed by the rising US Dollar and the increasing pressure on select emerging markets and Italian bonds. Countries running large current account deficits particularly Brazil, India, Indonesia, Turkey and South Africa may offer trading opportunities via various Country Funds which can be found in the ETF Global Screener.  Expect Investor money to flee these markets for the safety of US money markets.

Domestic Politics and International Relations will determine how far the Turkish crisis goes.  Endogan needs to continue domestic expansionary policies to keep his base. This will lead him to mend relations with the US and Europe in return for a bailout or pursue a new alliance with either China and/or Russia or face a severe domestic economic shock of crushing interest rate increases and capital controls.

For those who want to play the news, TUR, the iShares MSCI Turkey ETF would be a good trading vehicle. To play a scenario of a continued strong US Dollar – let us not forget Brexit is looking increasingly like a rough landing and any banking crisis resulting from Italian debt pressures or Turkish defaults, investors may want to use FXB, the Invesco British Pound Currency Shares ETF.

Forgotten in this week’s headlines was the 10 year anniversary of the Russo -Georgian War which many believe marked the end of the Post-Cold War Era and set the stage for the breakdown of the global regime of that era. We will look at the significance of this for investors next week.

We suggest a mindful eye on tools like our Select List and Risk and Reward Ratings that can be used to evaluate the vast set of opportunities in the ETF marketplace. Today’s market realities require a new approach to macro investing, one in which individual investors now have access to tools via ETPs to customize risk and return profiles in their portfolios. Use our Scanner to find those funds.

Thank you for reading the 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.

Trillion Dollar Baby

Tuesday, August 7, 2018 – After a week that saw Facebook (FB) set a new record for the biggest one day drop in Market Cap, the market needed a big win and much like J.J. Abrams, they decided to go back to the favorites with two of this bull market’s biggest winners. First, Apple (AAPL) managed to become the world’s first publicly traded company with market capitalization above $1 Trillion, then Tesla (TSLA) accomplished the truly unexpected, an actual apology from Elon Musk. And while Apple and Tesla made most of the headlines, our ETFG Quant data models were showing value-oriented funds beginning to find favor, signaling that the story of the bull markets comeback might be premature.

We’ve talked before about our ETF screening methodology that includes Behavioral factors like price momentum, short interest and implied volatility and we often look for common themes among the biggest weekly movers. What was noticeable to us at the end of last week was the list of funds which saw the biggest week-over-week change in their aggregate ETFG Behavioral score is lacking a substantial tech presence.

If there was one defining characteristic of the funds that made up our list of top movers last week, it’s that their combination of slow growth and financial stability puts them into the category of “anti-Teslas.” It has been a rough 18 months for value stocks but depending on the funds you use, last week was the third consecutive week that value outperformed growth although it has a long way to go before grabbing headlines with Vanguard Value (VTV) lagging 800 bps behind Vanguard Growth (VUG) YTD.

Not quite, as the presence of two Invesco funds, Invesco S&P 500 Low Volatility ETF (SPLV) and Invesco S&P 500 High Dividend Low Volatility ETF (SPHD), helps to muddy the narrative. Drawing your investments from the same pool leads to cross holdings, including certain consumer staples names, but focusing on the easy answer can quickly lead you to the wrong conclusions. Both funds also have significantly higher allocations to other value sectors including utilities. Most investors would be quick to point out that these two Invesco Funds are just as beholden to their number one sector, Utilities, which have had a strong few weeks as long-term bond yields begin to stabilize. If you can’t get past how utilities are historically rate sensitive, consider the fact that earnings season is now almost complete and utilities stocks did relatively well in the 2Q.

ETF Global Liquidation Watch:

Investors should also note that DB Agricultural Long ETN (AGF), X-Trackers MSCI China A Inclusion Equity ETF (ASHX) and DB Base Metals Double short ETN (BOM) have popped up on our monthly report, ETF Global Liquidation Watch List – August 2018 with a declining (TTM) Trailing Twelve Months of -10.98%, -14.19% and -18.76% respectively.

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.