Monday, September 23, 2019

Fed Strike

Monday, September 23, 2019 – The big news this week came on Wednesday, as the Federal Reserve decided to cut rates for the second time this year, to a target range of 1.75% to 2%. Many experts believe this is a sign that the Fed is preparing for a weak US economy in the near future. In addition, potential future rate cuts to come at the end of the year are becoming increasingly likely. This is the second time rates have been cut since July, a feat that, not too long ago, seemed impossible. As the Fed takes its stance on a slowing global economy, Trump takes his stance on higher rate cuts for US economic growth, we see a growing standoff between the two powerhouses that doesn’t seem to have an end in sight. It will be interesting to monitor the Fed, as their decisions on cutting rates in the future can play a key role in how the economy will turn out by the time Trump is up for re-election.

Overall, the market was slightly down this week compared to last week. The S&P 500 dropped from 3,007.39 last Friday to 2,992.07 and in that same timeframe, the Nasdaq dropped from 8176.71 to 8117.67, the Dow Jones dropped from 27,219.52 to 26,935.07. Aside from the fed cutting rates, we can also attribute this week’s drop to the ongoing trade war with China and an overall deceleration of global growth.

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

ETFG Quant Winners: After taking a look at our quant movers table, it was easy to see that the biggest winners this week were iShares Currency Hedged MSCI Mexico ETF (HEWW), showing a nearly 10% gain, followed by BMO Elkhorn DWA MLP Select Index ETN (BMLP), and iShares Currency Hedged MSCI Japan ETF (HEWJ), which both returned a 7.75% and 7.39% weekly gain respectively. It was a great week for iShares owners, as 8 of our top 10 gainers were iShares ETFs. What’s even more noticeable, is that majority of these iShares ETFs are global ETFs, so perhaps it’s easy to speculate that they performed so well because they did not feel the down week that the US market had.

ETFG Quant Losers: The clear loser this week was Barclays ETN+ Shiller CAPETM ETN (CAPE) and it fell -16.96%, which is almost double the amount that the second worst performer, SPDR MSCI ACWI ex-US ETF (CWI) had at -9.49%. CAPE, which tries to replicate the US core sector index, did not fare well this week and we can attribute this to the overall down week the US market had in comparison to previous weeks.

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