Two S&P 500 funds have been occupying the top 25 for most of this month as Quant correctly foresaw the current rally in the US market.  Not too many of us were ready to see that as the post election correction was gathering steam, showing the advantage of a non emotional quantitative model to help in your investment selections.  Today, one of those funds has garnered Quant’s top rank.  However, it is not the SPDR S&P 500 Fund (SPY) with its more than $109 billion in AUM but the lesser owned iShares S&P 500 Value Index Fund (IVE) that sits atop today’s rankings.  It only has $4.57 billion in AUM but that still makes it the 57^th largest fund in our database so don’t call it small.  It gets 9.62 Green Reward Diamonds today while carrying a Red Diamond Risk Rating of 3.74, comparing  favorably to SPY’s 8.80 Reward Rating and 4.07 Risk Rating, which still gives SPY a respectable 23rd place rank today.  Several notable differences account for those ratings and the most noticeable may be that Apple Inc. comprises 4.38% of SPY but is not held in IVE whose biggest position is a 3.85% weighting in General Electric.  That Apple position is a component of SPY’s biggest sector exposure in Information Technology at 19.3% of the fund.  IVE’s largest sector exposure is to Financials with its 4^th, 5^th and 6^th highest weighted positions being Berkshire Hathaway, Wells Fargo and JP Morgan Chase, along with Bank of America and Citigroup at 8^th and 9^th.  It is not because Quant now likes Financials as most of those sector funds still rank poorly as does the Consumer Discretionary Sector that makes up IVE’s second largest sector exposure.  SPY seems to have Quant’s preferred sectors in its higher weights but all of its Fundamental scores come in below IVE’s which gets an 81.1 total Fundamental Score to SPY’s 66.4.  Their Behavioral Scores are very close at 69.9 for SPY slightly beating IVE’s 69.6 showing how the market is turning to lower risk names.  We see this theme again when sorting by Quant’s top Behavioral Scores which produces an even lower average risk score among the top 10 and first decile.  We continue to hear this lower risk message out of Quant while also recommending more US focused funds.  Whether this foretells a continued US market rally or just better relative performance remains to be seen. Think about what you expect over the weekend and we’ll all see what Quant has to tell us Monday morning.  Until then, thank you for reading and have a nice weekend.

If you are reading this, you probably didn't win Powerball last night, better luck next time.  Lottery tickets are low risk and high reward but their low probability of returns doesn't qualify them as investments.  Quant’s top rankers have a high probability of outperforming the S&P 500 and Vanguard sees some of its funds in those top ranks today getting more than 9 Green Reward Diamonds and less than 4 Red Risk Diamonds.  But like earlier this week, we need to ask ourselves if it is the risk side or reward side driving the better rankings.  We may be seeing further evidence of Quant getting more cautious rather than getting enthusiastic about the US market; or the additional US funds in the top ranks could suggest the correction in our markets has run its course.  That question will be answered with hindsight but let’s take a look at those Vanguard Funds scoring well today.  The Vanguard Growth Fund (VUG) has had a good couple of weeks driving its Behavioral Score higher but its Fundamental Score lower, both register in the respectable mid 70s today giving that fund its 2^nd place ranking.  If you like to buy at lower valuations, you may prefer the Vanguard Value Fund (VTV) in 7^th place today.  That fund is not up as much as its growth counterpart in recent weeks so its Behavioral Score is a middling 63.4 but its Fundamental Score is a high 85.  If you don’t want to decide between growth and income, consider today’s 8^th place Vanguard Total Stock Market Fund (VTI).  It refers to the total US stock market and is notable for its 3,267 constituents.  An improving chart has boosted its Behavioral Score to 72.8 while its Fundamental Score has maintained the mid 70s level.  Not making the top 10 but still scoring well is the Vanguard Information Technology Sector Fund (VGT) in 12^th place today.  A good couple of weeks has benefited its Behavioral Score but from such a deep hole that it is still in the low 60s, the flip side of its correction is a very good 83.4 Fundamental Score.   One more to consider is the Vanguard S&P Mid-Cap 400 Fund (IVOO) in 16^th place today.  Its long term chart looks better than many but it is struggling with a short term downtrend that is keeping its Behavioral Score in the mid 60s.  Trading close to its all time high hasn't hurt the Fundamental Score at 82.3 but a short 2 year life limits the context on that.  As mentioned, all 5 funds have a Red Diamond Risk Rating below 4 which has driven the average risk rating for today’s top 10 down to a low 4.14 which is a message to heed.  The US market has been whipped around by politics recently and Santa seems to like the happy talk, but it remains to be seen if Washington's girls and boys are ready to share their toys.  So make your list and click on Quant to check it twice, you will avoid the naughty and identify the nice.

We were surprised this morning to read about the Chinese market breaking down to fresh four year lows.  The Wall Street Journal reports that the Shanghai Composite Index lost 1.3% on Tuesday to its lowest level since early 2009.  Quant’s two high scoring China funds, FXI and GXC, track different indices and are still close to their fourth quarter highs, what gives?  A couple factors explain the discrepancy.  The Chinese stock market has two classes of stock, one for citizens and a separate one for foreigners.  ETF Global hasn’t made it through China’s internet firewall yet so if you are reading this you can invest in the latter class, the news reports refer to the former.  The Journal article does mention that the Hong Kong Hang Seng Index, which caters more to foreigners, is up 18.5% this year.  Ranking in 2^nd place today, the aforementioned iShares FTSE/Xinhua China 25 Index Fund (FXI) has 24.3% of its assets in Hong Kong domiciled companies and the 5^th place SPDR S&P China Fund (GXC) has 20.3% of its assets there.  However, one would expect that different classes of stock representing similar underlying investments would eventually track each other so something else must also be at play.  The answer to that riddle can be found in CYB, CNY and FXCH.  Those are currency funds that track the Chinese Renminbi or Yuan and are trading near their recent highs, offsetting the decline in the local currency share prices.  Quant only ranks equity funds but those currency funds have earned low Red Diamond Risk Ratings although FXCH carries higher risk than the other two.  Delving into the depths of Quant, we do sense a warning on the Chinese market.  Several other China funds make the biggest drop list in Quant’s rankings with the Guggenheim China Real Estate Fund (TAO) the biggest loser dropping from 254^th place all the way down to 602^nd today, other tickers on that list include CQQQ, YAO, CHIQ, and HAO.  Investing in foreign lands, especially those in controlled economies, can be tricky so pay attention to any fund’s ETF Global rankings and ratings, they have an ability to keep you in the right names as proven by FXI and GXC which are still up nicely in this negative fourth quarter.

In scanning the globe this morning we see that Greece has gotten another aid package, congratulations.  Maybe that’s why the Global X FTSE Greece 20 Fund (GREK) is up more than 47% over the last 3 months, although the Greek market is seeing some selling on the news today.  Quant did not get on board that rally as the fund has ranked near the bottom with an overall score of 51.3 today giving it a rank of 564 out of more than 800 equity funds. We found that performance data using the enhanced functionality on our ETF Global Scanner.  Under the Filter button near the upper right we begin with the “Display Fields” function where we selected 1 and 3 month performance and made sure that Risk, Reward and Quant were also checked.  Under “Category” we checked all four Equity selections then hit the “X” in the upper right corner to bring us to the output that shows the first 20 of 943 selections.  Notwithstanding how many we choose to show, we can sort the entire output by any column, ascending or descending.  We can then select as many funds as we want to compare by checking the box to the right of each selection and then the orange Compare button next to Filter.  That narrows the list to just those funds we checked where we can see their data side by side and sort by whichever columns we wish.  If you are not sure what you are looking for, play around with the Filter choices and then sort the columns and see what jumps out at you depending on your own preferences.  There is a huge world of Exchange Traded Products out there and the ETF Global Scanner is but one tool to help you sort through all the choices.  We have added functionality based on what we hear from our users so please keep the suggestions coming; if there is something you want to see others probably do too so we appreciate your feedback.  Just send us an email to support@etfg.com or call your sales rep or internal liaison.                                         

That was quite a Santa Claus rally that saw the ETF Global Equity Index rise 1.37% and the benchmark all region and all asset class ETF Global1000 Index rise by 1.09% in Friday’s shortened session.  The US based Russell Funds we wrote about Friday morning all participated but lagged the one day equity returns.  Today’s new entrants into the top 10 suggest something else may be at play. The iShares MSCI Australia Index Fund (EWA) and the iShares S&P North American Natural Resources Index Fund (IGE) both jump into that group today at 5^th and 7^th place respectively and what they share is a lower than average Red Diamond Risk Rating.  They share that attribute with those Russell funds bringing the average Risk Rating for the top 10 down to 4.43, lower than the average for the first decile of 4.51 and the all equity fund average of 4.94 Red Diamonds.  We often remind you that Quant does not predict gains or losses but relative performance of equity ETFs over the intermediate term.    Quant’s behavioral scores pick up movement of the smart money into the bomb shelters as they perform better than the higher risk names.  So when the model ranks low risk funds more highly it could suggest trouble for the broader equity market.  Indeed, it was big gains in the behavioral scores that drove EWA and IGE into today’s top 10 as it was those same categories that drove the Russell funds into that group on Friday morning.  We hate to take any bounce out of Santa’s step as we enter the strongest season for equities but the question for the remainder of the fourth quarter will be whether Santa’s sleigh can scale the fiscal cliff.  Only time will tell if the next month becomes the most wonderful time of 2012, Quant suggests we keep one eye on risk and one on reward.

And there off!  As campers awake to their 20% off flat screens and Justin Bieber DVDs, Quant is feeling the American spirit too.  Four broad US based Russell funds make the top ranks today led by the iShares Russell 2000 Growth Fund (IWO) in 5^th place.  The fund has been scoring better recently and its price has participated in the rebound along with the general market over the last week.  That has helped its Technical Score rise into the low 60s from the low 50s a week earlier when its Fundamental Score reached the low 80s.  Four straight positive days have brought that Fundamental Score down to a still respectable 73.  The fund uses a replication strategy but it still has over 1000 constituents in the small cap growth sector of the market.  The iShares Russell 1000 Value Fund (IWD) on the other hand replicates the index tracking the large cap value sector of the market and that too finds itself in the top 10 today in 9^th place.  It has seen similar scores to IWO recently with most slightly higher except for IWO’s higher Sentiment Score suggesting some market skepticism towards those small growth stocks.  If you are not sure which makes more sense for you, consider the iShares Russell 3000 Fund (IWV) in 10^th place today.  That fund’s 1,121 constituents replicate the broad Russell Index that seeks to capture the entire US equity market.  Where its brethren have been creeping up in the ranks recently, this one jumps into the top ranks today partly on higher technical scores but mainly as a result of higher sentiment scores which readers know are more volatile than Quant’s other measures.  If that’s not enough for you, just missing the top 10 today is the iShares Russell 2000 Fund (IWM) in 12^th place.  Its only score above the 60s is its Sentiment Score at 80.2 today which has actually been stable in the low 80s for a few weeks.  It uses a representative sampling strategy that buys almost all 2000 names in the small cap index that covers both growth and value.  We thought Santa looked especially jolly closing out the Macy’s parade yesterday, maybe he’s getting ready to give us a good old fashioned Santa Claus rally to close out this otherwise dour fourth quarter.

Our favorite holiday is upon us.  No need to make a list and check it twice or wrapping presents late at night, this time we just go to Granny’s and eat, drink and be merry with our loved ones.  We have much to be thankful for this year beginning with you, our users.  Thank you for the time you spend with us, we hope it is well spent.  We are also thankful for the heart of ETF Global and the ultimate reason you come here, our Quant engine.  It is an algorithm that has been telling us to buy China despite the empty cities we can see on YouTube and the political process determined by seven old men behind closed doors.  But somehow Quant knew that China would be the place to allocate your equity investments this autumn and it has been spectacularly correct.  FXI and GXC are up nicely during this otherwise awful 4^th quarter for the equity markets.  Europe has also been a frequent subject in this space despite anti austerity riots and politicians that can’t seem to agree on their shared destiny.  The European names that Quant has been suggesting the most this fall have been EWQ of France, EWP of Spain and the pan European FEZ, all three are still positive for the quarter.  When the US gets a cold the emerging markets usually get the flu but as we hear sniffles across our economy and stock market, the emerging markets are humming along just fine.  EEM has been a top Quant ranker all fall and its uptrend from the summer lows is still intact, as is its high ranking at 11^th place today.  Indeed, Quant likes to stick with its winners and all the other names mentioned above are currently occupying the top 10 ranks so it’s not too late to get on board.  Whenever you are ready to allocate your equity investments make sure to check the daily Quant rankings, through good markets and bad they have proven to keep you in the best areas of the equity ETF market.  We are also thankful for a day off tomorrow but we’ll be back Friday morning to share Quant’s latest wisdom with you all.  If you have any questions or feedback about anything you see on ETF Global please let us know at support@etfg.com, or call your sales rep, we are here to help.  Thank you again for being part of the ETF Global community and have a very happy Thanksgiving!