Volatility and Volatility Subdued

Monday, October 15, 2018 – The word "crash" made several appearances in the headlines last week, and while this may be useful in selling newspapers or attracting clicks, it's often not an accurate characterization of the market’s environment. Yes, the stock market fell sharply, producing the worst week for equities since late-March. However, this brief decline still leaves the market 5.7% below its all-time high, a not-too-shabby metric.

What started as a bout of sector rotation out of technology and into late-cycle favorites like bank stocks shifted into a full-blown retreat on Wednesday and into Thursday as the carnage at the top of the S&P 500 pushed it out of its uptrend channel. The CBOE Volatility Index (VIX) spiked and hit its highest level since late March on Thursday with the Dow falling more than 1,300 points in two days and the S&P 500 retreating about 4.2% for the week.

The third quarter earnings season began on a mixed note on Friday morning when big banks JPMorgan Chase (-1.1%), Citigroup (+2.1%), and Wells Fargo (+1.3%) reported Friday before the opening bell. The financial sector added as much as 1.6% following bank earnings, but eventually rolled over, bringing the broader market with it. The group did rebound in the final stretch, closing higher by 0.1%. It also must be noted that 10 of 11 sectors finished in the green and information technology was the top performer with a gain of 3.2%.

Within the tech sector, giants Apple (+3.6%) and Microsoft (+3.5%) outperformed, as did chipmakers, evidenced by a 2.0% jump in the Philadelphia Semiconductor Index. Meanwhile, in the communication services sector (+2.1%), Netflix (+18.46) rallied 5.8% after Citigroup said its recent tumble represents a buying opportunity. Investors ought to utilize ETFG's Equity Exposure Summary, to compare these best opportunities: Communication Services Select Sector SPDR Fund (XLC), Vanguard Communication Services ETF (VOX) and iShares Global Communications Services ETF (IXP).

ETFG Weekly Select List - To best support the ETF selection process, The ETFG Weekly Select List highlights the 5 most highly rated ETFs per Sector, Geographic Region and Strategy as ranked by the ETFG Quant model.

Industrials and materials stocks performed worst this week, while utilities stocks fared best. Because of the sector’s success this week, it is important to note substantial movements in the Utilities subsection when comparing the most current Select List to last.

Although the top slot remained constant and Fidelity MSCI Utilities Index ETF (FUTY) came in at number 1, Utilities Select Sector SPDR Fund (XLU) clinched the second highest position. There was also substantial turnover in the third and fifth spots when the funds John Hancock Multifactor Utilities ETF (JHMU) and Vanguard Utilities ETF (VPU) made an appearance, respectively.

For full coverage of this week’s ETFG Weekly Select, one can download from our site or click here: ETFG Select List - October 15, 2018

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