The first week of 2019 was another roller coaster ride for
investors. The markets played a tug of war but US Equity Markets managed to end
the week in positive territory. The Large
Cap weighted S&P 500 closed at 2,531.94 and the broader NASDAQ Composite
closed at 6,738.86 for a weekly jump of 1.86% and 2.34 %.
Helping to move the major indexes on Boom Boom’s comments was an
unexpectedly strong jobs report despite a rise in unemployment claims and the
announcement of renewed trade discussions with China. Investor sentiment remains
cautious as concerns ranging from the economic fallout from an ongoing government
shutdown, increased questioning of corporate earnings quality, confidence in
the current administration, stability in the oil markets, credit concerns and
Brexit which appears to be headed for a hard landing. Investors seem to have
given pause that a global slowdown could be avoided.
We think investors sentiment has markedly shifted and will remain
cautious for good reason. First, Lu Wang at Bloomberg wrote yesterday in her
insightful article titled “Dip Buyers Beware the S&P 500 Bottoming Process
Can Take Time” that bear markets typically last some 8 months but can be
characterized by strong violent rallies as stocks struggle to regain their
footing. We agree with her. The numbers are the numbers.
As our friends at Barron’s pointed out in an interview with
Stephanie Pomboy, founder of MarcoMavens, the bull market has largely been
supported by stock buybacks and a small number of tech stocks driving the
indexes. She points out that since 2011, the S&P 500 EPS has risen by 67%
while aggregate US corporate profits only rose by 23%, according to the US
Bureau of Economic Analysis. Is there a
“bubble” in buyback-inflated earnings? What happens if there is a slowdown and
firms pull-back on the stock repurchase plans? We also noted an interesting
article by a Richard Phillips in the well-respected beltway publication, The
Globalist, https://www.theglobalist.com/us-stock-market-federal-reserve-economy/
who asks if the increased volatility is symbolic of deteriorating confidence in
US Institutions?
We expect market volatility to continue for some time as the
investors calculate the impact of new trade regimes, fallout from the ongoing
govt shutdown and general political instability worldwide. This creates
opportunities for traders and active investors who can use ETFs to take
advantage of real-time market volatility – both up and down!
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. We highlight a couple of ETFs that attracted
our attention.
Long term investors should look at OIH in the Energy Sector which
continued to share our top rating as does NFRA in Natural Resources and FUTY in
Utilities. For the more adventurous investor/trader, IYZ in Telecoms jumped
from 4 to 1. For those seeking plays in
emerging markets, EMIF and TUR for a Turkish play and EZA for the Middle East
& Africa continue to hold our highest ratings.
Today’s market realities require a new approach to macro
investing, one in which individual investors now have access to tools via ETPs
to customize risk and return profiles in their portfolios. We suggest keeping a
mindful eye on tools like our Select List, Scanner, ETFG Quant Scores and Risk
and Reward Ratings that can be used to evaluate the vast set of opportunities
in the ETF marketplace.
Thank you for reading ETF Global Perspectives!
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