Tariffs Aside

Monday, September 24, 2018 - Resilience is the name of the game and the markets have come to play. Last week, the Dow Jones Industrial Average led the way out of the 3 major US indices with a gain of about 600 points to 26,743. The S&P and Nasdaq Composite also found themselves in the winner’s circle for the week gaining about 40 and 23 points respectively. This all happening while the Trump Administration imposed a 10% tariff on $200 Billion more of Chinese products showing how strong this bull market continues to be.

In ETFs, Equity based developed markets received some of the largest inflows this week, taking in over $18B by Wednesday, according to the ETFG Fund Flow Summary. One of the ETFs that has been reaping the benefits of inflows is VOO, the Vanguard S&P 500 ETF. In the month of September, VOO has taken in over $6B or about 6% of its AUM. IVV, which is iShares version of the S&P 500 ETF has followed suit with the second highest inflows with just over $4B.

ETFG Quant Movers - In the ETFG Quant Movers, Asian-based ETFs saw the biggest gains to their scores. The WisdomTree Dynamic Currency Hedged Japan Equity Fund (DDJP) and the Invesco Golden Dragon China ETF (PGJ) added 9.56 and 9.23 points to their overall Quant scores respectively.

In the losers column, we saw safe haven types of funds dropping some points to their overall score. The WBI BullBear Rising Income ETF (WBIA), Invesco Variable Rate Preferred ETF (VRP) and the SPDR S&P Dividend ETF (SDY) lost 10.51, 7.27 and 6.91 points to their overall scores respectively.

ETFG Weekly Select List – this weekly report features the 5 most highly rated ETFs per Sector, Geographic Region and Strategy as ranked by the ETFG Quant model.

Because of the sector’s success in the major indexes this week, we’d like to highlight some substantial movement in the Consumer Discretionary sector when comparing this week’s Select List to last week’s. Invesco Dynamic Leisure and Entertainment ETF (PEJ) jumped up one spot to be the top-ranked fund in the sector. It took over for the Columbia Emerging Markets Consumer ETF (ECON) which is now in the 2^nd ranked spot. That moved the Invesco Dynamic Retail ETF (PMR) to 3^rd place, down from the second ranked spot last week while the 4^th and 5^th spots, SPDR S&P Retail ETF (XRT) and Fidelity MSCI Consumer Discretionary ETF (FDIS) remained the same.

For full coverage of this week’s ETFG Weekly Select, please see here:   ETFG Select List - September 24, 2018

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.

GICS Changes and More Big Headlines

Monday, September 17, 2018 – The fickle nature of stock market sentiment was on full display this past week, as investors brushed off lingering, unresolved trade tensions to propel all 3 major indexes to weekly gains with the DJIA, S&P 500, and Nasdaq up 0.9%, 1.2%, and 1.4% respectively. Despite the looming imposition of 25% tariffs on an additional $200 billion of Chinese imports and a still wide gulf in trade renegotiations between the U.S. and its trading partners, apparent headway made with Canada and China helped buoy the major indexes for the week.

News that the US and China will be holding high level economic talks at the end of September and the subsequent boost in sentiment, belies the fact that are still a slew of key issues that need to be reconciled, of which neither the U.S. nor its trading partners have indicated any willingness to alter or moderate their conflicting positions. Among these outstanding disputes are the forced technology transfers, subsidization of state industries, and market restrictions imposed by the Chinese government and the future of dispute resolution panels in a revised NAFTA. Until these differences are bridged, the prospect for any meaningful reduction in global trade tensions is limited.

ETFG Quant Movers – This week's list of top ETFG Quant gainers is overwhelmingly populated with international focused funds, illustrating that despite current trade frictions, opportunities still exist for discerning investors. From 1-10, this week's top gainers were DGT, RNDM, IGT, IVLU, VEU, MFDX, IEUR, MLPG, FJP, and EUDG.

By the same token, as this week's list of top quant losers demonstrates, investors need to maintain a watchful eye when looking for opportunities in international markets as nearly half of this week's list have an international focus. The ETFs suffering the largest quant score declines were BRD, SDIV, SBIO, KBWD, PIN, VPU, SCJ, IPAY, MOM, and TTFS.

Looking Ahead - Arguably the biggest headline event in the upcoming week will be the introduction of the new GICS communications sector. In its largest reorganization ever, Wall Street's widely followed industry classification system will be reshuffling its consumer discretionary, telecommunications, and technology sectors to form a new communications sector on September 21^st. Meant to reflect the evolution of the modern economy, the GICS overhaul will involve the migration of several bluechip names, including Facebook, Alphabet, AT&T, and Netflix, to this newfangled sector. Given the proliferation of index tracking funds and the market-leading position of many of these affected stocks, this taxonomy change will have critical implications for investors. All told, this change will reconfigure about 10% of the S&P 500's market cap and force passive managers who are benchmarked to these sectors to reallocate billions of dollars.

Although some preventive measures have been taken, such as State Street's launch of the Communication Services Select Sector SPDR Fund (XLC) in June and Vanguard's implementation of transition indexes and gradual fund rebalancings in May, some volatility will certainly be unleashed by this change. As this shift will prompt fund managers to offload or add major positions, investors in mutual funds will likely be hit with capital gains distributions. However, for ETFs investors, this move will reinforce one of the central benefits of the ETF structure - the in-kind creation/redemption mechanism, which will largely shield or limit capital gains.

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.

Domestic vs. International Forces

Monday, September 10, 2018 – This past week, investors engaged in an all too familiar exercise: the weighing of mixed signals in the market. A constant balancing act between positive, domestic economic growth and mounting geopolitical tensions and sagging international economic momentum that has defined the investment environment this year. To date, notwithstanding a few bouts of market jitters and heightened selling pressure, investors have largely ignored signs of risk and instead helped propel the U.S. stock market to its longest bull run in history. However, in a reversal, the balance of positives and risks tipped towards the latter as another encouraging jobs report was unable to overcome the specters of an intensifying trade war and heavier tech scrutiny.

Record unemployment benefit applications, rising worker productivity figures, and August's encouraging jobs report, which revealed that wages grew at the fastest pace in nearly a decade and the economy add a fresh 201,000 jobs, failed to surmount the sharp escalation of US-China trade tensions and increasing regulatory pressure on the tech sector. Trade tensions, which appeared to be easing with recent progress made towards a revised NAFTA, suddenly spiked as the Trump administration announced the possibility of an additional $267 billion on top of the threatened $200 billion in tariffs on Chinese imports. Altogether, these tariffs would cover essentially all of Chinese imports and have for grave implications for global supply chains. Meanwhile, the breakneck growth of the tech sector appears to be in peril, as Congress lambasted Twitter and Facebook executives for their lax security controls and raised the prospect of greater regulatory oversight of social media companies. These developments helped sap any momentum in the markets and sink the tech-heavy Nasdaq to its worst week in nearly six months, declining 2.6%. In addition the DJIA lost 0.2% and the S&P% suffered its first decline of over 1% in two months.

ETFG Quant Movers – Our ETFG Quant Model captures the divergence in global economic fortunes, as domestically focused ETFs are favored by our model, while internationally focused funds lag. Small Caps, which are more insulated from global trade tensions and have been buoyed by the recent tax cuts, heavily populated our top ranked funds, with the SPDR S&P 600 Small Cap Value ETF (SLYV) and SPDR S&P 600 Small Cap ETF (SLY) ranking as the 2nd and 3rd highest rated ETFs.

Conversely, international ETFs, which are considerably more vulnerable to global trade tensions, sit near the top of our weekly Quant losers list. In total, 7 out of the 10 funds on our weekly Quant losers list have an international focus. These include PIMCO RAFI Dynamic Multi-Factor International Equity ETF (MFDX), X-trackers FTSE Emerging Comprehensive Factor ETF (DEMG), Developed International Equity Select ETF (RNDM), SPDR Global Dow ETF (DGT), iShares Core MSCI Europe ETF (IEUR), X-trackers MSCI EAFE High Dividend Yield Equity ETF (HDEF), IQ 50 Percent Hedged FTSE Europe ETF (HFXE), and WisdomTree Europe Quality Dividend Growth Fund (EUDG).

Against this backdrop of heightening uncertainty, our quant model can help investors navigate these difficult conditions and identify opportunities within the broad and ever-growing ETF marketplace.

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.

New Highs via Tech

Tuesday, September 4, 2018 – Stocks recorded solid gains last week, helping bring most of the major indexes to all-time highs. The technology-heavy Nasdaq Composite Index performed best and crossed the symbolic 8,000 threshold for the first time, while the Dow Jones Composite Index lagged and remained roughly 2.5% off the highs it established earlier in the year. Technology stocks also outperformed within the S&P 500 and growth shares built on their substantial lead over value stocks for the year to date. This equity performance is supported by strong corporate and economic fundamentals. On the corporate side, we’ve seen two consecutive quarters of earnings growth greater than 20%, compared with last year. Even the retail sector, once considered to be weakened by competitive pressures, showed renewed strength as major retailers like Walmart and Target reported strong quarterly earnings.

In other trade news, there were reports that the Trump administration is considering taking further steps to implement new tariffs on $200B of Chinese goods. This action, if it occurs, is likely to be met with a reciprocal response by the Chinese government and is another step in the escalation of trade tensions between the two countries. Trade and policy uncertainties are a headline risk, but the fundamental foundation of economic expansion and rising corporate profits are still very much intact and can help extend the bull market.

In ETF news, Technology ETFs as well as Healthcare and Consumer Discretionary ETFs had the most return over the month of August. According to the ETFG Heat Map Tech ETFs had an average return of 6.70%, Healthcare 4.96%, and Consumer Discretionary 4.04%.

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

ETFG Quant Winners: Vanguard Dividend Appreciation ETF (VIG) rose 7.83 points to 50.83, Vanguard Mid-Cap Value ETF (VOE) was up 6.87 points ending the week at 45.27, SPDR EURO STOXX 50 ETF (FEZ) climbed 6.26 points to 61.43. Rounding out the Top Five gainers were Vanguard Mega Cap ETF (MGC) up 6.11 points to 43.86 and VanEck Vectors Rare Earth/Strategic Metals ETF (REMX) closing up 6.01 points at 49.92.

ETFG Quant Losers: On the heels of new developments in the U.S. China trade war, the biggest loser of the week was Global X China Consumer ETF (CHIQ) dropping nine points to 36.37. Cambria Foreign Shareholder Yield ETF (FYLD) dropped seven points to 48.28, iShares Edge MSCI Min Vol Europe ETF (EUMV) fell 6.68 points to 47.82 while iShares Russell 3000 ETF (IWV) and iShares Edge MSCI Min Vol EAFE ETF (EFAV) both fell 6.54 points to 45.55 and 45.25 respectively.

ETFG Weekly Select List - the 5 most highly rated ETFs per Sector, Geographic Region and Strategy as ranked by the ETFG Quant model. Because of the sector’s success in the major indexes this week, we’d like to highlight some substantial movement in the Technology Sector portion when comparing this week’s Select List to last. First Trust Nasdaq Semiconductor ETF (FTXL) and Global X FinTech ETF (FINX) remained in the top two spots from last week while three newcomers rocketed up the select list: BlueStar Israel Technology ETF (ITEQ), 3D Printing ETF (PRNT), SPDR NYSE Technology ETF (XNTK). As technology stocks continue their hot streak keep an eye on the ETFG Weekly Select list to see what ETFs are riding the bull markets alongside them.

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.