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.
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