Once again, US Investors entered
last week on good news from Boeing on the MAX 737 tests getting underway and a huge surprise earnings report from FEDEX which pushed the markets higher. The
week ended with a positive jobs report on Thursday which took the market to positive territory for an early close despite it becoming clear that efforts to
contain the Coronavirus had failed in the Sunbelt States and threatened to
extend regional lockdowns or worse.
US markets closed up last week
with the S&P 500 finishing up 4.02% and the Nasdaq Composite up 4.62%. The
broad market as measured by the S&P 500 closed the week at 3130.01. The
NASDAQ Composite closed at an all-time high of 10,207.63. Despite these
positive numbers, the market as measured by the S&P 500 just advanced 1.6%
since June 2nd due to the competing themes narrating the markets
between Covid spikes and Recovery Green shoots. The first half of 2020 will be
epic in illustrating how a new strain of virus can upend the world economy, drive
oil process to negative price levels and create social and political unrest. For
the record, the S&P 500 finished the second quarter with the highest performance
in the past 22 years.
As of early Monday morning,
overseas markets are moving up quickly with the China CSI 300 Index moving up
over 5% and European Stocks moving up over 2%. The Chinese Markets appear to be
benefiting from recent government directives to accelerate the development of
home-grown technology firms. The China Bull is pulling up regional markets
including Hong Kong and Japan this morning.
European Markets are benefiting
from a shift in Germany’s focus from being the balanced fiscal policy enforcer
to a Save the Euro Zone at any cost from the economic devastation caused by the
Coronavirus. There are a considerable
number of ETFs in the US that allow focused plays on China and Europe. As a
follow-up note to our comments on the future of the Big City, we note that
Fujitsu announced today that it plans to cut its big city office space by 50%
by 2022 by having workers stationed at remote locations i.e., work at home. Investors
should take caution when investing in real estate ETFs to look under the hood at
holdings and check our risk ratings on these ETFs.
All these issues got us thinking about
seasonality, particularly that August, typically a month of mayhem, is fast
approaching. We note that John Kolovos
at Macro Risk Advisors observed that the market tends to rally strongly from
June 26 – July 11th…which it has so far.
Nevertheless, August is a mere 3
weeks away and we wish to remind our readers about historical observations
about the month which falls into the Dog Days of Summer. August tends to be the
worst month for stock returns in the past decade. Serious things that cause
unexpected negative volatility happen in August. 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 devalued the Yuan in
August 2015
·
China again devalued the Yuan
in August 2019
Last year, The Financial Times
labelled 2019 the Summer of Fear. This
year with the invisible Coronavirus threatening a second round in the Fall, it
could easily be labelled The Summer of Terror!
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 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!
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