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ETF Stories of November: All About Retail, OPEC and Tax Cuts

Sanghamitra Saha
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The month of November was pretty eventful, as expected. A consensus carried out from 1950 to 2016 shows that November ended up offering positive stock returns in 44 years and negative returns in 23 years, per moneychimp.com, with an average return of 1.38%. But upbeat global economic events help U.S. equity gauges to score even higher this November.

Among the key ETFs, SPDR S&P 500 ETF SPY, SPDR Dow Jones Industrial Average ETF DIA and PowerShares QQQ ETF QQQ advanced about 3.2%, 4.1% and 2.4%,respectively, in the last one month (as of Nov 30, 2017).

Let’s find out the key economic events that helped the market to attain such heights.

Solid Start to Holiday Season Shopping: Cyber Monday Tops

With Thanksgiving, the one month-long holiday season kicked-off. And this year, Americans spent profusely on occasions like Thanksgiving, Black Friday and Cyber Monday. Per Adobe, Cyber Monday touched a new record as the largest online sales day in history with $6.59 billion by the end of the day, up 16.8% year over year.

Black Friday and Thanksgiving Day realized $5.03 billion and $2.87 billion in revenues, respectively. Already $50 billion in online revenues have been generated, up 16.8%. Adobe also predicts that “this will be the first-ever holiday season to break $100 billion in online sales.” Some winning ETFs from this trend were Amplify Online Retail ETF IBUY and ETFMG Video Game Tech ETF GAMR which gained about 2.7% and 3.4%, respectively, in the last one month (as of Nov 29, 2017).

OPEC Output Cut Till Dec 2018

As expected, OPEC and non-OPEC oil behemoth Russia decided to protract oil production cuts until the end of 2018 at the end of November. The deal to reduce oil output by 1.8 million barrels a day was first signed a year ago by the 14-member OPEC cartel, Russia and nine other global producers. This puts oil ETFs like United States Oil Fund USO and United States Brent Oil BNO in focus.

Tax Reform: Soon To be Real?

The month witnessed considerable progress in tax reform with movement from both Senate and House. While House Republican approved the tax plan in a 227-205 vote, Senate leaders convinced likely opponents with a host of “deals to resolve their concerns” at the end of the month. U.S. Tax Reform Fund TAXR gained about 4.1% in the last one month (as of Nov 29, 2017) (read: House Passes Tax Bill: Likely ETF Winners & Losers).

Powell’s Testimony

The next Fed chair Jerome Powell indicated that he is an ardent supporter of deregulation in the banking sector. If this step materializes, financial stocks and ETFs like Financial Select Sector SPDR ETF XLF should gain ahead. Already, the fund was up 2.5% in the last one month (as of Nov 29, 2017) (read: Powell to Lead Fed: Best ETF Strategies).

Talks About FCC’s Repeal of Net Neutrality

In a move to bolster deregulation in the telecom space, Federal Communications Commission (FCC) unveiled a draft in the month to repeal the Net Neutrality regulation undertaken in the Obama era. The FCC is slated to vote on the proposed changes at its next monthly meeting on Dec 14 (read: ETF Winners & Losers if FCC Repeals Net Neutrality).

The rules so far have prevented high-speed Internet service providers (I.S.P), from stopping or slowing down the delivery of websites. The Obama era move proved to be less profitable for these companies thanks to a deluge of prohibitions. If the proposal clears the regulatory hurdle, telecom ETFs like Fidelity MSCI Telecommunication Services Index ETF FCOM will benefit. The fund was up 3.1% in the last one month (as of Nov 29, 2017).

Dow, S&P Log Biggest Gains Since September

Powell’s indication for deregulations and higher chances of a tax reform led the Dow Jones Industrial Average and the S&P 500 to notch their biggest gains since September.

Tech Slide

While most of the developments were positive in the month, the soaring technology sector stumbled to end the month and saw its worst day since Jun 9 on Nov 29, 2017. Overvaluation concerns seemed to have caused this rout (read: Tech ETFs & Stocks Tumble: Is it a Solid Entry Point?).

This explains the relatively lower returns of tech-heavy QQQ than DIA and SPY. Technology Select Sector SPDR Fund XLK was up 1.9% in November.

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