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.

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