By J Clinton Hill, Capital Markets Strategist @ Hillbent.com
ETF Market Commentary
Today’s economic backdrop of a stronger than expected Retail Sales report in October-2016 gives a data dependent Fed more justification to raise rates. This sentiment is currently being expressed by the Fed Futures contract which assigns a 91% chance of such occurring. In spite of this, investor appetite for risk was not tempered.
In equities, the DJ-30 Industrials (DIA) made a new record high, but the real winner today was the Nasdaq-100 (QQQ) which is attempting a key bullish reversal after establishing support @ the 114 level. However, more prominent leaders were Emerging Markets (EEM), Latin America 40 (ILF) and Brazil (EWZ). Top gaining sectors were Energy (XLE), Information Technology (VGT), and Utilities (XLU).
The trend for bonds remains bearish, but a relief rally may be underway as their comparative-risk returns become more competitive with dividend yields that are being compressed by higher P/E valuations. For the moment, investor preference still favors higher yields. High Yield Bonds (HYG) and High Yield Munis (HYD) were the strongest performers in this asset class.
In currency markets, US Dollar (UUP) power prevails, but as resistance @ 26 level is approaching, some consolidation may be due. In spite of this, the Euro (FXE) and Japanese Yen (FXY) continue to struggle with inertia created by the headwinds of strong US economic data and expectations of a Trumped-up stimulus package to come.
Commodities defiantly advanced against a stronger dollar and 10-year treasury rates. The DB Commodity Index (DBC) and US Oil (USO) were two of the top three performers on our ETF watchlist. Meanwhile, Gold (GLD) is finding support at May-2015’s previously successful support level.
In summary, much of the market’s recent uptrend is heavily weighted towards President-elect Trump’s policy proposals, e.g. corporate tax cuts, infrastructure programs, and a more deregulated business environment. With that said, investors may be pushing aside some consideration for valuations. However, should perceptions shift to a more tempered view that any or none of the above might not align with the expected acceleration in corporate earnings , then the market could experience another correction, given its technically overbought condition.
No further comments this evening. (Please refer to ETF summary table below for performance analysis .)
ETF Performance Summary
|RS 1Yr||Exchange Traded Fund||Last||Chg||% Chg|
|100||DJ-30 Industrials (DIA)||189.34||0.57||0.30%|
|69||Emerging Mkts (EEM)||34.99||0.69||2.01%|
|89||Europe FTSE (VGK)||46.36||0.32||0.70%|
|72||Latin America 40 (ILF)||27.78||0.59||2.17%|
|96||Pacific Ex-Japan (EPP)||40.83||0.24||0.59%|
|74||FTSE China 25 (FXI)||36.26||0.50||1.40%|
|0||VIX Short-Term Futures (VXX)||29.94||-1.35||-4.31%|
|Major Equity Sectors|
|84||Consumer Discretionary (XLY)||80.04||0.31||0.39%|
|39||Consumer Staples (XLP)||50.76||0.31||0.61%|
|25||Real Estate (XLRE)||29.95||-0.20||-0.66%|
|98||Technology / Info (VGT)||118.69||1.57||1.34%|
|Bonds & Fixed Income|
|13||20+ Yr Treasury (TLT)||121.91||0.60||0.49%|
|23||Aggregate Bond Fund (AGG)||108.89||0.08||0.07%|
|52||Treasury Inflation Protection (TIP)||113.44||0.07||0.06%|
|95||Investop Corp Bond (LQD)||117.83||0.36||0.31%|
|81||High Yield Corp Bond (HYG)||85.20||1.11||1.32%|
|4||Pimco Intermed Muni Bonds (MUNI)||53.08||-0.06||-0.11%|
|13||High Yield Muni (HYD)||29.69||0.30||1.02%|
|88||US Dollar Bullish (UUP)||25.88||0.04||0.15%|
|10||Euro Trust (FXE)||104.30||-0.05||-0.05%|
|55||Japanese Yen Trust (FXY)||88.38||-0.63||-0.71%|
|77||DB Commodity Index (DBC)||14.70||0.32||2.23%|
|44||US Oil (USO)||10.34||0.47||4.76%|
|42||DJ Real Estate (IYR)||74.23||-0.27||-0.36%|
|64||DJ Home Construction (ITB)||26.96||0.06||0.22%|
|29||Residential Real Estate Index (REZ)||59.33||-1.10||-1.82%|
Signing off @ Hillbent…
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