Monday, April 8, 2019

Strong Week to Start 2Q

Monday April 8, 2019 - Stocks got off to a promising start to the second quarter, as positive overseas and domestic data injected some calm into the markets and helped push the major indexes to within 2% of their record highs. China provided the initial catalyst, after Monday's PMI release showed a return to growth in the manufacturing sector after a six month streak of contraction. Apparent progress made in US-China trade talks also added to the buoyant mood this week, though formidable obstacles to completing a deal remain. Domestically, slowdown concerns were further assuaged with upbeat US manufacturing data and Friday's March payroll report that revealed a robust hiring rebound. After sluggish growth in February, employers added 196,000 jobs in March, while average hourly earnings rose 3.2% down from 3.4% last month. These figures had the simultaneous effect of allaying economic growth concerns and fears that rising wage costs would begin to erode profit margins.

This supportive backdrop helped propel the S&P 2.1% higher, extending its winning streak to seven consecutive sessions. The DJIA and Nasdaq received similar boosts, rising 1.9% and 2.7% respectively for the week.

While optimism was the prevailing sentiment this week, significant challenges lie ahead with lingering issues around trade, monetary policy, corporate earnings, the fading impact of tax cuts and geopolitical uncertainties like Brexit. Attention this week will shift to Q1 earnings, Brexit and US-China trade progress, which all possess the potential to upset this recent momentum.

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

ETFG Quant Winners: This week’s biggest gainers were dominated by global funds, reflecting the week's shift in global growth sentiment. Leading the way was the Virtus WMC Global Factor Opportunities ETF (VGFO) up 14.50 points to an ETFG Quant score of 56.40. Following VGFO in the top 5 was Bernstein Global Research Fund (BRGL) with a 14.20 point advance to 56.40, Oppenheimer International Revenue ETF (REFA) up 11.15 points to 59.78, Global X Scientific Beta Europe ETF (SCID) rising 10.50 points to 59.96 and First Trust RiverFront Dynamic Asia Pacific ETF (RFAP) up 10.21 points to 57.28.

ETFG Quant Losers: This week’s biggest loser was Eaton Vance Stock NextShares (ESTC) dropping 8.76 points to an ETFG Quant score of 55.00. The four other funds to suffer the largest declines were Invesco DWA Technology Momentum ETF (PTF), VictoryShares US Discovery Enhanced Volatility Wtd ETF (CSF), Vanguard Extended Market ETF (VXF), and Invesco Shipping ETF (SEA).

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

Due to the rebound in global growth sentiment this week, we'd like to feature the current top-rated ETFs by geographic region according to our model. Among the funds with an Asian-Pacific focus, First Trust Chindia ETF (FNI) currently receives the most favorable ranking. Chinese-oriented funds dominated our Asia-Pacific group, with iShares China Large-Cap ETF (FXI) and VanEck Vectors ChinaAMC SME-ChiNext ETF (CNXT) all placing in this week's top 5.

Globally, VanEck Vectors Oil Service ETF (OIH), iShares Global Consumer Staples ETF (KXI), iShares Global Healthcare ETF (IXJ), VanEck Vectors Biotech ETF (BBH) and iShares Global 100 ETF (IOO). This disparate group of funds illustrates the importance of avoiding a herd mentality and keeping a discerning and diligent eye when searching for global investment opportunities.

While these geographic regions appear to have wind behind their backs at the moment, their continued outperformance is contingent upon on the precarious prospects of sustained economic growth momentum and an orderly US-China trade resolution.

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