Investors continued to navigate a tenuous and
divergent array of economic signals, with the announcement of high level
US-China discussions in October and the ostensible relaxation in trade tensions
proving to wield the largest influence on market sentiment. Receding
geopolitical risks, including the formation of a stable Italian governing
coalition and bleaker prospect of a hard-Brexit, helped further lift animal
spirits. Domestic economic data releases showed that, while hiring slowed, wage
growth is positive, unemployment remains near a record low, productivity is
growing and the services sector is expanding. Furthermore, while largely
positive, the picture painted by this week's data releases did little to alter
expectation for Fed rate cuts, adding further support to equities. Favorable
domestic data was augmented by dovish global central bank actions, with the
PBOC's reduction of bank reserve requirement and the loosening of Russian
central bank policy.
Despite this series of encouraging
developments, other signs pointed to the downward impact of global trade
tensions. Tuesday's ISM manufacturing index showed that US manufacturing
activity contracted to a 3 year low. This added to the increasingly gloomy
global manufacturing outlook, in which countries such as Japan, South Korea,
and the U.K. have all recently reported slowing activity, weighed down by the
sharpening of global trade hostilities. This sort of data lays bare the
increasingly fraught nature of the current market environment, in which the
longer trade tensions remain unresolved and this cloud of uncertainty looms,
the more economic decision making and global growth will be constrained.
ETFG
Quant Movers – Those ETFs who have had the largest weekly change in
their respective, overall ETFG Quant ratings.
ETFG Quant Winners: The
top funds registering the largest gains in their Quant Total Score
were Global X Scientific Beta Asia ex-Japan ETF (SCIX), Global X MSCI
China Financials ETF (CHIX), First Trust Indxx Global Natural Resources
Income ETF (FTRI), ProShares MSCI Europe Dividend Growers ETF (EUDV),
and Invesco Global Revenue ETF (RGLB). The global orientation of these
funds shows the boost provided by this week's de-escalation in trade tensions.
ETFG Quant Losers: The
funds suffering the largest declines in their Quant Total Score were Ivy
Focused Value NextShares (IVFVC), iShares Core MSCI EAFE ETF
(IEFA), Invesco S&P 500 High Beta ETF (SPHB), First Trust
Developed Markets ex-US AlphaDEX Fund, and SPDR S&P Telecom ETF (XTL).
An assortment of reasons contributed to these funds declines, including
unfavorable idiosyncratic factor approaches, sector exposures, or geographic orientations.
ETFG Weekly Select List - The five
most highly rated ETFs per Sector, Geographic Region and Strategy as ranked by
the ETFG Quant model.
Given their sensitivity to global trade and
manufacturing activity, we'd like to focus on the 5 most highlighted rated
funds within the Basic Materials and Industrials sectors. In Basic Materials,
our model currently ranks Global X Gold Explorers ETF (GOEX), U.S.
Global GO GOLD and Precious Metal Miners ETF (GOAU), SPDR S&P Metals
& Mining ETF (XME), iShares MSCI Global Silver Miners ETF (SLVP),
and Sprott Gold Miners ETF (SGDM) as the 5 most promising funds. Within
Industrials, First Trust NASDAQ Global Auto Index Fund (CARZ), First
Trust Global Engineering and Construction ETF (FLM), SPDR S&P Kensho
Smart Mobility ETF (HAIL), John Hancock Multifactor Industrials ETF
(JHMI), and First Trust Nasdaq Transportation ETF (FTXR) rank as the highest
funds according to our model. Amid heightened, trade-induced volatility, it is
imperative to be particularly discerning when considering investments in these
sectors. Our Select List can serve as a guide to navigate these choppy waters
and unlock hidden upside.
Thank you for reading ETF Global Perspectives!
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