Inflection Point for the Holidays?

Monday, November 19, 2018 – Heavy volatility continued to beset markets this week as plunging oil prices, concerns about worsening growth prospects in the technology sector and broader global economy, and geopolitical turbulence fueled widespread investor unease. Oil prices maintained its descent into bear market territory as worries over a rising surplus of crude oil and waning demand helped extend its losing streak to 12 consecutive sessions before slightly stabilizing to close the week down 6.2%. Technology, the largest Sector in the S&P 500, was the second worst performer this week after shedding 2.5%. Apple sparked tech's downturn, as gloomy forward guidance from key iPhone suppliers, like Lumentum and NVIDIA, helped deliver the former trillion dollar titan its seventh consecutive weekly loss, its longest stretch since 2012. Another former trillion dollar stalwart, Amazon, contributed to the downward momentum, after it breached bear market territory from its September 4th all-time highs. Further compounding the tech sector's woes, fellow FAANG heavyweight, Facebook, also weighed on the market after fresh revelations about its poor handling of 2016 election interference sent its stock down over 4% for the week.

The prevailing concerns over peak earnings growth that afflicted the tech sector also beleaguered the broader market. In particular, the consumer discretionary and retail spaces suffered, with companies like Walmart, Macy's, and Home Depot all nosediving despite their earnings beats. This continued an emerging trend of the dwindling influence of upside earnings surprises. 161 companies in the S&P 500 have posted better than expected Q3 earnings, only to register an average loss of 5.5% in the two-day period following their announcements. Jason Zweig of WSJ conjectured that this may mark an inflection point, as investors are now assigning more weight to the quality of quarterly earnings and forward guidance, rather than simply surpassing expectations.

Diverging global economic fortunes further dampened sentiment, with data releases showing economic contraction in Germany, Japan, and China. Additionally, the continuing fallout from Saudi Arabia's involvement in the murder of a dissident journalist and increasingly precarious outlook for a Brexit deal and imminent resolution to U.S.-China trade tensions further contributed to this week's negative sentiment.

The confluence of these market-adverse developments helped send all the major indexes lower for the week, with the S&P 500, DJIA and Nasdaq losing 1.6%, 2.2%, and 2.2% respectively.

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

ETFG Quant Winners: Our top weekly Quant gainers prominently features emerging market-oriented funds, signaling that this week's selloff may offer a buying opportunity. Virtus WMC Global Factor Opportunities ETF (VGFO) led this week's list with a 14.38 point gain, bringing its score up to 53.92. This week's leaderboard included other names, such as Invesco China Small Cap ETF (HAO), Invesco Emerging Markets Infrastructure ETF (PXR), CSOP FTSE China A50 ETF (AFTY), Franklin FTSE Brazil ETF (FLBR), and Franklin FTSE Hong Kong ETF (FLHK).

ETFG Quant Losers: Conversely, the impact of rising interest rates, slowing global growth, and fading energy demand is reflected in this week's top Quant losers. Reality Shares DIVCON Dividend Guard ETF (GARD) registered the largest weekly decline, followed by growth sensitive funds like Oppenheimer International Revenue ETF (REFA), Alpha Architect International Quantitative Momentum ETF (IMOM), and Invesco WilderHill Progressive Energy ETF (PUW).

ETFG Weekly Select List - the five most highly rated ETFs per Sector, Geographic Region and Strategy as ranked by the ETFG Quant model.

Volatility in the energy sector led to a reshuffling a top this week's Select List as First Trust North American Energy Infrastructure Fund (EMLP) was supplanted by Invesco DWA Energy Momentum ETF (PXI). Meanwhile, as unease continued to engulf the tech sector, our model still views First Trust Nasdaq Semiconductor ETF (FTXL) as the sector standout. Lastly, as warning signs began to flash in the global economy this week, our model favors Vanguard FTSE Emerging Markets ETF (VWO) and WisdomTree Europe Hedged Equity Fund (HEDJ) as the top emerging markets and developed markets funds.

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