Trading on Flows

Monday, August 26, 2019 – Equity markets were on track to finish higher for the week until China unveiled a new round of retaliatory tariffs and President Trump vowed to respond, upsetting markets. This marked the fourth consecutive weekly loss as a late-week escalation in the U.S.-China trade dispute undermined optimism over retail sales and Federal Reserve policy. In this new episode of escalation in trade tensions, China announced that it will impose tariffs on $75 billion U.S. goods. At the annual central bank summit in Jackson Hole, Fed Chair Powell left the door open for another rate cut when the committee meets next month, acknowledging the risks to global and U.S. growth from trade uncertainty. While the Fed and trade disputes dominate the headlines, it should not be lost that economic and corporate data remain fairly positive.

Positive earnings and revenue reports from Target (TGT), Lowe’s (LOW), and Home Depot (HD) helped consumer discretionary shares outperform the broader market. In ETF related news, Fixed income ETFs continued to gather assets this week. Schwab U.S. TIPS ETF (SCHP) and Vanguard Short-Term Inflation-Protected Securities ETF (VTIP) topped the flow charts each gaining over $500 million in AUM. Also benefiting from the economic fears and low yields was the SPDR Gold Trust (GLD).

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

ETFG Quant Winners: The top five gainers in Quant Total Score in order were US Equity Dividend Select ETF (RNDV), Global X MSCI Pakistan ETF (PAK), Vanguard FTSE Europe ETF (VGK), Barclays Return on Disability ETN (RODI) and SPDR S&P Kensho Future Security ETF (FITE).

ETFG Quant Losers: Honorable mentions in the loser category were ProShares Russell 2000 Dividend Growers ETF (SMDV), iShares MSCI Chile ETF (ECH), WisdomTree Japan Multifactor Fund (JAMF), First Trust Energy AlphaDEX Fund (FXN) and Main Sector Rotation ETF (SECT). The reasons for the drop-in quant score for these funds is obvious as behavioral scores and global factors came into play.

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

Considering the sector’s success, we’d like to highlight some substantial movement in the Consumer Discretionary portion when comparing this week’s Select List to last. Invesco Dynamic Retail ETF (PMR) held onto the 1^st place position while SPDR S&P Retail ETF (XRT) jumped from 4^th to 2^nd place. ProShares Decline of the Retail Store ETF (EMTY) claimed 3^rd followed by Columbia Emerging Markets Consumer ETF (ECON) and SPDR S&P Homebuilders ETF (XHB) respectively.

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Assumptions, opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice.  ETF Global LLC (“ETFG”) and its affiliates and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively ETFG Parties) do not guarantee the accuracy, completeness, adequacy or timeliness of any information, including ratings and rankings and are not responsible for errors and omissions or for the results obtained from the use of such information and ETFG Parties shall have no liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of such information. ETFG PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE.  In no event shall ETFG Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the information contained in this document even if advised of the possibility of such damages.

ETFG ratings and rankings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities or to make any investment decisions. ETFG ratings and rankings should not be relied on when making any investment or other business decision.  ETFG’s opinions and analyses do not address the suitability of any security.  ETFG does not act as a fiduciary or an investment advisor.  While ETFG has obtained information from sources they believe to be reliable, ETFG does not perform an audit or undertake any duty of due diligence or independent verification of any information it receives.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.  Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue.  Prices, values, or income from any securities or investments mentioned in this report may fall against the interests of the investor and the investor may get back less than the amount invested.  Where an investment is described as being likely to yield income, please note that the amount of income that the investor will receive from such an investment may fluctuate.  Where an investment or security is denominated in a different currency to the investor's currency of reference, changes in rates of exchange may have an adverse effect on the value, price or income of or from that investment to the investor

Stock Markets and Big Thinking

Monday, August 19, 2019 - Last week, President Trump announced his interest in buying Greenland. While the offer was quickly rebuffed, it got us thinking about “Big Thinking” in the public sphere which has long been absent.

Why? A quick look around the globe we see a number of hot spots which need big thinking to resolve them: rioting in Hong Kong which dares Beijing to send in the troops, challenges to continued Euro stability via rising tensions in Italy, renewed tension between India and Pakistan over India’s crackdown on Kashmir, financial instability in domestic Chinese Banks, Currency and Trade Cold War between China and the US and the likely hard Brexit landing.

Big thinking could go a long way to reduce investor concerns of signs of economic slowdowns worldwide, continued populist uprisings and lastly an increasing percentage of zero interest rates in government bond markets. Why? Because it appears that we have come up against the limits of Modern Monetary Theory and politicians and economists may be starting to think about Big Fiscal Stimulus and revisions to the social contract under Liberalism which have been log jammed since 2008.

This week’s meeting of global bankers at the annual Jackson Hole Economic Symposium just might be the place where the public begins to hear Big Ideas floated by traditionally conservative bankers to resolve some of the above economic and social challenges. Friday will be the highlight of the conference when we hear from Jerome Powell on the Fed’s view of interest rates and other matters.

US stocks rose and fell with the movement of Treasury Bond interest rates this past week. The 30 Year Bond dipped below 2% for the first time ever before bouncing back and the 10 Year dipped below 1.5% for the first time since 2016. This led to fear and speculation that the US was heading toward zero or even negative interest rates. Joining a choir of others who we mentioned last week, even Alan Greenspan said zero rates could be coming soon to your local bank. Things like this spook investors. The POTUS announced a delay of the imposition of additional tariffs on Chinese consumer goods which immediately brought relief to the market.

Stocks ended the week slightly down with the large cap weighted S&P 500 closing at 2888.68 and the broader NASDAQ Composite closing at 7895.99 for a weekly loss of 1.08% and .79%. Nevertheless, the indexes are up YTD significantly at 15.23% and 19% respectively. We expect market volatility to continue for the foreseeable future. Remember that volatility is a sign of limited liquidity so investors should mind their cash to take advantage of any significant drops. Volatility is a two-way street and zero interest rates could easily cause a stock melt-up depending upon conditions.

This week investors should keep an eye on how the German Bund Auction is received as well as news out of Jackson Hole on Thursday and Friday. Also, beware of any tweets from the POTUS who can quickly move markets.

Investors seeking safety in this environment should consider locking in their gains or reallocation into utility, US intermediate and long term bond ETFs, Consumer Staples and REIT ETFs. Bond ETFs if rates drop, should provide yield and some price movement participation. Investors who share this view should use the ETF Screener in conjunction with the Select List to place their bets.

This creates opportunities for traders and active investors who can use ETFs to take advantage of real-time market volatility –both up and down!

To take advantage of this, we suggest looking at our 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 for investors given our views. In the Consumer Staples KXI continues to be our top pick, JHMU is our top ranked in the Utility Sector, while OIH is a good value play for the Energy Sector.

We suggest keeping a mindful eye on tools like our Select List and Risk and Reward Ratings that can be used to evaluate the vast set of opportunities in the ETF marketplace. 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. Use our Scanner to find those funds.

Thank you for reading ETF Global Perspectives!

ETFG 21 Day Free Trial:  https://www.etfg.com/signup/quick

_______________________________________________________

Assumptions, opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice.  ETF Global LLC (“ETFG”) and its affiliates and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively ETFG Parties) do not guarantee the accuracy, completeness, adequacy or timeliness of any information, including ratings and rankings and are not responsible for errors and omissions or for the results obtained from the use of such information and ETFG Parties shall have no liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of such information. ETFG PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE.  In no event shall ETFG Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the information contained in this document even if advised of the possibility of such damages.

ETFG ratings and rankings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities or to make any investment decisions. ETFG ratings and rankings should not be relied on when making any investment or other business decision.  ETFG’s opinions and analyses do not address the suitability of any security.  ETFG does not act as a fiduciary or an investment advisor.  While ETFG has obtained information from sources they believe to be reliable, ETFG does not perform an audit or undertake any duty of due diligence or independent verification of any information it receives.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.  Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue.  Prices, values, or income from any securities or investments mentioned in this report may fall against the interests of the investor and the investor may get back less than the amount invested.  Where an investment is described as being likely to yield income, please note that the amount of income that the investor will receive from such an investment may fluctuate.  Where an investment or security is denominated in a different currency to the investor's currency of reference, changes in rates of exchange may have an adverse effect on the value, price or income of or from that investment to the investor

Summer Mayhem Tests Stock Market’s Resilience

Monday, August 12, 2019 - August can be mayhem’s favorite time, for example:

The First Gulf War started in  August 1990
The Asian Contagion began in August  1997
The Russian Debt Crisis started in August 1998
US Credit Ratings were downgraded in August 2011
China devaluated the Yuan in August 2015
China again devaluated the Yuan in August 2019

The Financial Times just labeled this the Summer of Fear. Why?  A quick look around the globe we see a number of hot spots which easily spook investors: rioting in Hong Kong which dares Beijing to send in the troops, challenges to continued Euro stability via rising tensions in Italy, renewed tension between India and Pakistan over India’s crackdown on Kashmir, financial instability in domestic Chinese Banks, Currency and Trade Cold War between China and the US, weakness in oil markets, signs of economic slowdowns worldwide, hard landing Brexit, continued populist uprisings and lastly an increasing  percentage of zero interest rates in government bond markets.

US stocks rose or fell with the news headlines on the US – China Trade War. Relations fell to a new low when China reduced its support of the Yuan leading it to break thru the psychologically important FX rate of 7 to the dollar which lead the US administration to label China as a Currency Manipulator. The consensus view among investors that a deal was around the corner is now dead.

Stocks seesawed and ended the week relatively flat with the large cap weighted S&P 500 closing at 2918.65 and the broader NASDAQ Composite closing at 7959.14 for a weekly loss of .46% and .56%.  Nevertheless, the indexes are up YTD at a respectable 16.47% and  19.95% respectively. Gold closed above $1500 for the first time since 2013 and  the US 30 Year Bond briefly yielded 2.13% as bond prices rallied as investors sought safety. We expect market volatility to continue for the foreseeable future.

Looking around the globe the trend toward zero and negative interest rates in the G7 peeked our attention. A recent graph from showing that 43% of global bond markets outside of the US now at zero or at negative interest rates. We found to our surprise a particular case in Denmark which may become more widespread.  Last week, Jyske Bank, the 3^rd largest bank in Denmark announced that it would offer 10 year mortgages at an interest rate of negative .50%.  That means that the mortgage loan declines 50 bps per year before the creditor makes a payment!  That is a first to our knowledge.

This got us thinking that around the world, investors are willing to give governments their cash for up to 50 years (in the case of Switzerland) for the promise to get back some of their money. This means that investors are willing to forego interest for the peace of mind of storing their cash and hedging i.e., limiting their potential loss with the govt in lieu of parking it elsewhere and risk losing substantially more.

Investors seeking safety in this environment should consider locking in their gains or reallocation into utility, US intermediate and long-term bond ETFs and REIT ETFs. Bond ETFs if rates drop, should provide yield and some price movement participation. Investors who share this view should use the ETF Screener in conjunction with the Select List to place their bets. 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 for investors given our views.  In the Consumer Staples KXI is our top pick.  JHMU   is our top ranked in the Utility Sector.

We suggest keeping a mindful eye on tools like our Select List and Risk and Reward Ratings that can be used to evaluate the vast set of opportunities in the ETF marketplace. 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. Use our Scanner to find those funds.

Thank you for reading the ETF Global Perspectives!

ETFG 21 Day Free Trial:  https://www.etfg.com/signup/quick

_______________________________________________________

Assumptions, opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice.  ETF Global LLC (“ETFG”) and its affiliates and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively ETFG Parties) do not guarantee the accuracy, completeness, adequacy or timeliness of any information, including ratings and rankings and are not responsible for errors and omissions or for the results obtained from the use of such information and ETFG Parties shall have no liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of such information. ETFG PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE.  In no event shall ETFG Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the information contained in this document even if advised of the possibility of such damages.

ETFG ratings and rankings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities or to make any investment decisions. ETFG ratings and rankings should not be relied on when making any investment or other business decision.  ETFG’s opinions and analyses do not address the suitability of any security.  ETFG does not act as a fiduciary or an investment advisor.  While ETFG has obtained information from sources they believe to be reliable, ETFG does not perform an audit or undertake any duty of due diligence or independent verification of any information it receives.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.  Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue.  Prices, values, or income from any securities or investments mentioned in this report may fall against the interests of the investor and the investor may get back less than the amount invested.  Where an investment is described as being likely to yield income, please note that the amount of income that the investor will receive from such an investment may fluctuate.  Where an investment or security is denominated in a different currency to the investor's currency of reference, changes in rates of exchange may have an adverse effect on the value, price or income of or from that investment to the investor

Dog Days...

Monday, August 5, 2019 - The stock market sold off this week with a bulk of its losses coming after President Trump threatened a 10% tariff rate on $300 billion of Chinese goods, effective September 1^st. The S&P 500 (-3.1%) and the Nasdaq Composite (-3.9%) pulled back considerably from last week's record highs, while the Dow Jones Industrial Average (-2.6%) and Russell 2000 (-2.9%) also had poor performances.

Heading into the week, investors already knew it was going to be eventful. Earnings were in full force, highlighted by upbeat results and guidance from Apple (AAPL); the Fed held its policy meeting that concluded with a 25-basis points rate cut and an announcement to end its balance sheet reduction efforts two months ahead of schedule; U.S.-China trade talks wrapped up in Shanghai, albeit with little progress; and the July employment report showed another decent gain in nonfarm payrolls.

Still, none of these outcomes appeared to stir much conviction among investors. Instead, stocks fell noticeably after Fed Chair Powell described the July rate cut as a "mid-cycle adjustment," although much of that decline was erased the following day as investors regrouped to the idea of low rates and a suggestion from Mr. Powell that monetary policy could still accommodate another rate cut.

That was the case until President Trump's tariff threat on Thursday reignited trade and growth concerns that send stocks and U.S. Treasury yields sharply lower and undid the gains in oil ($55.74, -$0.45, -0.8%).

Nine of the 11 S&P 500 sectors finished lower with seven sectors losing at least 3.0%. The consumer discretionary (-4.6%) and information technology (-4.4%) sectors fell over 4.0%, while the utilities (+0.3%) and real estate (+2.1%) sectors benefited from the lower interest rates.

The trade-sensitive semiconductor and transportation stocks also succumbed to heavy selling pressure. The Dow Jones Transportation Average dropped 3.7%, and the Philadelphia Semiconductor dropped 6.6%. Disappointing guidance from Advanced Micro Devices (AMD) also weighed on the semiconductor group.

Aside from the obvious drop in equities, the flattening of the yield curve was also a discouraging development for investors and lenders that depend on healthy net interest margins. The spread between the 2-yr yield and 10-yr yield narrowed to 15 bps from 21 bps last week. The 2-yr yield fell 16 basis points to 1.71%, and the 10-yr yield fell 22 basis points to 1.86%. The U.S. Dollar Index increased 0.1% to 98.10, briefly hitting a two-year high before pulling back following the tariff news.

The top 3 Quant Gainers of this week are Franklin FTSE Europe ETF (FLEE), X-trackers International Real Estate ETF (HAUZ), and Global X MSCI Norway ETF (NORW). The top rated 3 Quant Losers of the week are SPDR S&P Kensho Intelligent Structures ETF (SIMS), SPDR Solactive Canada ETF (ZCAN), and VanEck Vectors Low Carbon Energy ETF (SMOG).

The ETFG Select list shows our top-rated ETF by each sector. Global X Gold Explorers ETF (GOEX) is our top rated Basic Material. ProShares Decline of the Retail Store ETF (EMTY) is our top rated Consumer Discretionary. Our top rated Consumer Staples ETF is iShares Global Consumer Staples ETF (KXI). Our top rated Energy ETF is VanEck Vectors Oil Service ETF (OIH).

To learn more about our ETFG Select List, please visit us at https://media.etfg.com/files/Select%20List/ETFG%20Select%20List%20-%20July%2022,%202019.pdf or call us at (212) 223-ETFG (3834).

Thanks for reading ETF Global Perspectives!

ETFG 21 Day Free Trial:  https://www.etfg.com/signup/quick

_______________________________________________________

Assumptions, opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice.  ETF Global LLC (“ETFG”) and its affiliates and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively ETFG Parties) do not guarantee the accuracy, completeness, adequacy or timeliness of any information, including ratings and rankings and are not responsible for errors and omissions or for the results obtained from the use of such information and ETFG Parties shall have no liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of such information. ETFG PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE.  In no event shall ETFG Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the information contained in this document even if advised of the possibility of such damages.

ETFG ratings and rankings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities or to make any investment decisions. ETFG ratings and rankings should not be relied on when making any investment or other business decision.  ETFG’s opinions and analyses do not address the suitability of any security.  ETFG does not act as a fiduciary or an investment advisor.  While ETFG has obtained information from sources they believe to be reliable, ETFG does not perform an audit or undertake any duty of due diligence or independent verification of any information it receives.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.  Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue.  Prices, values, or income from any securities or investments mentioned in this report may fall against the interests of the investor and the investor may get back less than the amount invested.  Where an investment is described as being likely to yield income, please note that the amount of income that the investor will receive from such an investment may fluctuate.  Where an investment or security is denominated in a different currency to the investor's currency of reference, changes in rates of exchange may have an adverse effect on the value, price or income of or from that investment to the investor.