Pushing Through Record Highs

Monday, June 24, 2019 - U.S. stocks continued their record-setting pace for the month of June, following a dovish shift in the Federal Reserve's posture and signaling of its willingness to cut rates if warranted by economic conditions. Wednesday's accommodative stance by the Fed echoed a fresh commitment earlier in the week by the ECB to introduce further stimulus to head off rising economic risks and combat moribund growth and inflation. The dovish synchronization of global central bank policies was well received by investors this week and served as a bulwark against of host of concerns that threaten to derail global economic growth.

Despite a benign shift in global central bank policy and the brightening prospect of a U.S.-China trade deal, investors still have to contend with issues such as still unresolved trade disputes, sluggish economic data, Brexit uncertainty and escalating U.S.-Iranian military tensions. Any negative developments in these array of issues threaten to disrupt the delicate balance of factors that have currently favored rising equity prices.

Unaffected by these looming threats, stocks surged into record territory this week, with the DJIA, S&P 500, and NASDAQ rising 2.4%, 2.2.%, and 3.0% respectively. As of Friday, the DJIA is up 7.7.% for the month, which would mark its best monthly performance since October 2015 and best June since 1938. Meanwhile, the S&P 500 notched a record close on Thursday and its 7.2% monthly advance would be its best June performance since 1955. Adding to this banner month, NASDAQ's 7.8% gain would be its best June since the 2000 amid the dot-com euphoria.

These gains also coincided with a further decline in 10 year Treasury yields, which sank below 2.0% for the first time since 2016 before recovering to end the week at 2.04%. The continued decline of global government bond yields adds another mixed signal to the global economic picture and will be a dynamic worth monitoring in the coming weeks.

ETFG Quant Winners: The easing of global trade tensions helped fuel this week’s biggest Quant score gainers. From 1-5, this week's top gainers were the Global X MSCI China Communication Services ETF (CHIC), Bernstein Global Research Fund (BRGL), Franklin FTSE Hong Kong ETF (FLHK), Developed International Equity Select ETF (RNDM), and SPDR Solactive Canada ETF (ZCAN).

ETFG Quant Losers: The ETFs suffering the biggest Quant declines were more of a mixed bag this week. From 1-5, the top losers were First Trust India NIFTY 50 Equal Weight ETF (NFTY), iShares Morningstar Small-Cap ETF (JKJ), Principal Sustainable Momentum Index ETF (PMOM), iShares Russell 2000 Value ETF (IWN), and FlexShares Morningstar Emerging Markets Factor Tilt Index Fund (TLTE).

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

Following an apparent breakthrough in U.S.-China trade talks we'd like to focus on the weekly changes amongst ETFs in the Asia-Pacific geographic group. With the exception of two ETFs swapping the 3rd and 4th spots, no changes occurred in the composition of our top 5 rated Asia-Pacific funds from last week to now. While progress in U.S.-China trade discussions served as a catalyst for this week's market action, our model is more forward-looking and long-term oriented in its outlook and is appreciably less sensitive to such short-term fluctuations. For long-term upside plays in the Asia-Pacific region, consider our top 5 rated ETFs, which may be better able to withstand ongoing global trade tensions - 1) First Trust Chindia ETF (FNI), 2) iShares MSCI South Korea ETF (EWY), 3) iShares MSCI Malaysia ETF (EWM), 4) iShares China Large-Cap ETF (FXI), and 5) WisdomTree Asia-Pacific ex-Japan Fund (AXJL).

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