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.
Two key events have taken place as investors prepare for the summer break, both connected to the European Union. U.S. President Donald Trump has reached an unexpected accord to cooperate with the European Union on trade, after months of intense negative rhetoric. Unicredit described the agreement as ‘vague’ but it stipulates that no trade tariffs will be implemented during the negotiations. Meanwhile, the European Central Bank left the interest rates on hold and said the economy still needed a great degree of monetary stimulus. ECB’s marginal lending facility and the deposit facility will remain unchanged at zero and negative 0.40%, respectively. ECB President Mario Draghi described the agreement reached between the U.S. and Europe as a good sign, but said it was too early to assess the actual content. Chinese authorities have decided to provide support to the domestic economy as the trade war with the U.S. is gathering steam. In a move signaling that the priority in Beijing has shifted from reducing debt to growing the economy, central authorities have provided nearly $200 billion in liquidity to local governments to invest in infrastructure projects. U.S. existing home sales disappointed in June, dropping to 5.38 million from 5.41 million a month before. Analysts had expected sales to expand 5.46 million. Sentiment among economic actors in Europe is mixed, according to a host of services and manufacturing indexes. While Europe-wide manufacturing PMI rose to 57.3 in July from 55.9 in the prior month, the services sector disappointed, falling from 55.2 in June to 54.4 in the current month. U.S. crude oil inventories dropped by 6.1 million barrels for the week ended July 20, more than reversing all the gains recorded in the prior week. U.S. unemployment claims continue to stay near record low levels. For the week ended July 21, claims came in at 217,000, up from a record low 208,000 in the prior week.
Risk Appetite Review
The stock market registered strong gains this week as investors prepare for the summer vacation. Historically, the month of August has been volatile, with many selloffs occurring during the period. For now, however, riskier assets High Beta (SPHB B-) remain in vogue, edging up 1.33%. Equal Weight (RSP B+) is the poorest performer with a rise of 1.11%. The broad market (SPY A) is the second-best performer with an advance of 1.28%.
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Major Index Review
Major indexes were mixed. Dow Jones (DIA A-) was the best performer this week, as investors shunned some of the technology names and small-cap stocks amid hopes for a trade deal between Europe and the U.S. (DIA A-) has surged 2.12% for the week and is also the best performer for the rolling month, up more than 5%. Small-cap stocks (IWM B+) were the only faller in the past five days, down 0.24%, as investors took some profits off the table and ploughed them into blue chip stocks. An agreement between the U.S. and Europe not to impose tariffs on each other anymore until the trade negotiations complete boosted global companies and hurt small, domestic-focused ones. (IWM B+) is also the worst performer for the rolling month, up only 1.92%.
To see how these indices performed a week before last, check out ETF Scorecard: July 20 Edition
Sectors posted mixed performance. Telecom stocks (XTL A) were the worst performers both for the week and the rolling month with a drop of 0.77% and a gain of 0.79%, respectively. The chief reason behind the woeful performance of late is the advent of 5G, which requires massive investments and is expected to hurt profitability in the foreseeable future. Energy equities (XLE A), meanwhile, recorded the best performance for the week, up 2.41% on higher oil prices. For the rolling month, the industrial sector (XLI A) is the best performer with a rise of 5.54%.
Foreign Equity Review
Foreign equities were all up. Unsurprisingly, Chinese equities (FXI A-) have risen as much as 3.6% as the central authorities launched a stimulus program to counter the negative effects of the trade war with the U.S. British equities (EWU A-) posted the smallest gains, up 0.49%, as the EU dismissed the latest Brexit plan advanced by Prime Minister Theresa May as ‘magical thinking.’Now, May’s government faces pressure to resign, casting another cloud of uncertainty on the island’s prospects. (EWU A-) is also the worst performer for the rolling month, up 0.43%. Brazilian equities (EWZ B+) surged 11.35% in the past 30 days, claiming the crown of the best performer.
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Commodities were mixed. Gold (GLD A-) is still seeking its lost glitz but, in the meantime, continues to post losses – down 0.54% for the week. Silver (SLV C+), meanwhile, is the worst performer for the rolling month with a decline of 5.48%. Crude oil (USO A) is the best performer both for the week and the rolling month with solid gains of 2% and 4%, respectively, as demand for the black commodity is rising in the U.S.
Currencies were mixed. The euro (FXE A) dropped by 0.61% as the ECB sounded out a cautious tone, with President Mario Draghi saying the Eurozone economy still needs a great degree of stimulus. The Japanese yen (FXY C+) is the best performer for the week, up 0.56%. However, the yen also reported the biggest loss for the rolling month, down 1.40%. The U.S. dollar (UUP A) remains the best performer for the rolling month, up 0.52%.
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