To help investors keep up with the markets, we present our ETF Scorecard. The Scorecard takes a step back and looks at how various asset classes across the globe are performing. The weekly performance is from last Friday’s open to this week’s Thursday close.
This week was full of economic developments, from the World Economic Forum in Davos to the monetary policy decision by the European Central Bank. U.K. retail sales decreased by 1.5% in December compared to the month prior. Analysts had expected a drop given the strong sales in November, but only by 0.8%. Year-on-year, retail sales registered positive growth of 1.4%. The European Central Bank kept its monetary policy steady, largely in line with expectations. Its benchmark interest rate was kept at zero, while the deposit rate was at minus 0.4%. However, ECB President Mario Draghi took a veiled swipe on the current U.S. administration for talking down the U.S. dollar, after Secretary of Treasury Steve Mnuchin said a weak dollar was good for the economy. Draghi noted that Mnuchin’s comments essentially broke an agreement between the countries barring trading wars. The president acknowledged that a strong euro was one of the biggest risks to the derailment of the fragile Eurozone economy. With an 8 to 1 majority vote, Bank of Japan decided to keep its benchmark interest rate at minus 0.1% and maintain the 10-year government bonds’ yield at zero percent. As for the asset purchases, the bank said it will keep the acquisition of exchange-traded funds and real estate assets unchanged, at 6 trillion yen and 90 billion yen, respectively. The annual World Economic Forum kicked off in Davos on January 23, gathering the world’s top political, business and academic leaders. German Chancellor Angela Merkel, French President Emmanuel Macron and U.S. President Donald Trump were among the attendees. Macron noted that France should change its culture of regulation in order to fight bureaucracy and promised tax and fiscal incentives to encourage more risk-taking in France. Meanwhile, Merkel issued a veiled criticism of Trump’s protectionist policies, classifying it as populism. Trump is expected to speak on Friday. Germany’s economy had a strong start in 2018, registering robust growth in services with Flash Services PMI rising 1.2 points in December to 57, the highest figure in nearly seven years. Manufacturing sentiment dropped to 61.3 from 63.3 in the prior month, disappointing analysts, who had expected flat progress. U.S. existing home sales declined by 3.6% in December to an annualized rate of 5.57 million due to lack of supply, below consensus estimates of 5.75 million. The figure marked a consistent drop from the previous month, where sales came in at 5.78 million. Crude oil inventories declined by 1.1 million barrels for the week ended January 19, marking the tenth consecutive weekly drop. Gasoline stocks, meanwhile, continued their upward advance, rising by 3.1 million barrels during the same period. U.S. unemployment claims came in at 233,000 for the week ended January 20, beating analyst forecasts of 240,000.
Risk Appetite Review
Markets were on a tear this week, prompting many investors to worry about the odd lack of volatility. Low Volatility (SPLV A) was the best performer this week, surging 1.43%. The S&P 500 (SPY A) also posted good performance, rising as much as 1.25% for the week. High Beta (SPHB B-) posted the smallest gains, up 0.15%, as investors embraced less risky assets.
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Major Index Review
Global markets were all up. Emerging markets (EEM A-) were again the best weekly performer, boosted by a weaker dollar and broad-based optimism. (EEM A-) has advanced 2.17% in the past five days, extending monthly gains to 10.6%. (EEM A-), which was also the best performer for the rolling month, received a boost from U.S. Secretary of Treasury Steve Mnuchin, who indicated he favored a weak dollar. European equities (EFA A) posted the smallest gains this week – up only 0.67%, suffering because of a surging euro. For the rolling month, however, Russell 2000 (IWM B+) is the worst performer with an advance of just 3.94%.
To see how these indices performed a week before last, check out ETF Scorecard: January 19 Edition.
Sectors have posted strong performance. Consumer Discretionary ETFs (XLY A) was the best performer for the week and the rolling month, up 2.61% and 9.18%, respectively. The sector’s gains were primarily driven by a stunning rise of Netflix (NFLX), which skyrocketed 18% after revealing impressive subscriber growth for the fourth quarter. The industrial sector (XLI A) was the worst performer and the only faller this week, down 0.05%, as one of its exponents, General Electric (GE), was hit by a Securities and Exchange Commission probe into losses related to its legacy insurance business. For the rolling month, utilities (XLU A) continued to underperform, falling by 2.86%.
Foreign Equity Review
Foreign equities were all up. Brazil’s shares (EWZ B+) were on a tear this week, posting the best weekly and monthly performances. (EWZ B+) was up 6% over the past five days and 17.54% for the rolling month. The weekly rise came after a Brazilian court upheld a previous ruling convicting former President Luiz Inacio Lula da Silva of corruption. As expected, Germany (EWG B+) was the worst performer for the week, rising just 0.20% due to a strong euro. India (EPI B+), however, is the worst monthly performer with an advance of just 5.41%.
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Commodities were all up. Natural gas (UNG B-) has again beaten its commodity peers by a great margin this week, surging 4.68% thanks to record-low temperatures across the U.S. and other regions of the world. For the rolling month, (UNG B-) is up 24.4%, representing the best performance by far. Copper (JJC A) is again last in terms of weekly performance with only a tepid advance of 0.08%. For the rolling month, (JJC A) fell nearly 2%.
The British pound (FXB A-) was the strongest this week, robustly rising nearly 2%. Combined with outperformance in the previous weeks, the pound is up 5.7% for the rolling month, the best performance from the pack. The U.S. dollar (UUP A) was the only faller this week, down 1.23%, after Mnuchin suggested a weak dollar was good for the U.S., breaking with previous administrations’ tradition of supporting a strong greenback. President Donald Trump later tried to contain the damage, suggesting he was in favor of a strong dollar as this was an indicator of a robust economy. The U.S. dollar is also the only faller for the rolling month, down nearly 4%.
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