Monday, December 24, 2018

Christmas in the Red

Monday, December 24, 2018 – As families gather to celebrate the holidays, investors seem conflicted as to whether the glass is half full or half empty in regards to the markets. Looking back, we reminisce about headlines touting “all-time highs” and up until a few weeks ago, investors appeared confident. It would seem the Fed agrees with the notion of half full with last week's decision to raise short-term interest rates for a fourth time this year. The Federal Reserve tried to strike a balance between these steep market fluctuations and its optimistic assessment of a strong economy. Conversely, the market began this week with a trio of worries, including trade disruptions, geopolitical concerns and the compounding specter of further Fed rate hikes. Not to mention, the threat of a governmental shutdown drove an additional bout of volatility in Friday's trading.

All major benchmarks slid to their lowest levels in well over a year. The technology-heavy Nasdaq Composite Index (Fidelity NASDAQ Composite Index Tracking Stock (ONEQ)) fared worst and joined the small-cap Russell 2000 Index (iShares Russell 2000 ETF (IWM)) in bear market territory, down more than 20% from its all-time highs in August. The S&P MidCap 400 Index (SPDR S&P Midcap 400 ETF Trust (MDY)) also moved into bear market terrain on Friday morning. The pullback was especially dramatic in the energy sector as oil prices plunged to the lowest levels in over a year.

Speaking of volatility, the Cboe Volatility Index (VIX) saw major highs, levels last seen in February. As a matter of fact, a few of the volatility linked ETFs did quite well in 2018. Over the past year, the iPath Series B S&P 500 VIX Short-Term Futures ETN (VXXB), VelocityShares VIX Short-Term ETN (VIIX) and iPath S&P 500 VIX Short-Term Futures ETN Class A (VXX) all surged over 50% year-to-date.

ETFG Weekly Quant Movers – In the ETFG Quant Movers, we saw some interesting movements with S&P linked funds. Honorable mentions in the “Weekly Gainers’ category, iShares Core S&P 500 ETF (IVV), iShares Micro-Cap ETF (IWC) and Vanguard S&P Small-Cap 600 ETF (VIOO) saw an increase of 28.27%, 25.61% and 22.17% to their overall Quant Score.

Weekly ETFG Quant losers included, Invesco S&P 500 Low Volatility ETF (SPLV), Hull Tactical US ETF (HTUS) and Inspire Small/Mid Cap Impact ETF (ISMD) all three funds saw a decrease of 22.31%, 21.75% and 21.45% respectively to their overall scores.

ETFG Weekly Select List
 - the 5 most highly rated ETFs per Sector, Geographic Region and Strategy as ranked by the ETFG Quant model.

As expected, we saw major turnover in both the Natural Resources and Financial categories of the Sector portion of the ETFG Weekly Select List. We would like to highlight these sectors due to the surprising correlation to last week’s analysis. In the Natural Resources portion, Invesco Global Agriculture ETF (PAGG) jumped from 5th to 1st while newcomers SPDR S&P North American Natural Resources ETF (NANR) and First Trust Indxx Global Agriculture ETF (FTAG). In Financials, after the Fed’s rate increase Invesco KBW Regional Banking ETF (KBWR) moved up two spots to claim 1st place this week while SPDR S&P Insurance ETF (KIE) and Invesco KBW Bank ETF (KBWB) were awarded 2nd and 3rd place respectively.

Merry Christmas and thanks for reading ETF Global Perspectives!

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