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Top ETF Stories of July

Sanghamitra Saha

The month of July was favorable for Wall Street thanks to a dovish Fed. All three key U.S. indexes saw the second consecutive month of gains in July. Let’s take a look at the key happenings in the ETF world in the first half.

Wall Street Hits Record High

Wall Street seemed all keyed up in July as the Dow crossed a historic 27,000 and the S&P 500 touched 3,000 for the first time. Fed rate cut optimism, a fresh start to U.S.-China trade talks and stabilization in the oil patch made this possible. Growth ETFs benefited majorly as evident from the 2% jump in iShares Russell Top 200 Growth ETF IWY.

Fed Cuts Rates but Signals No Further Near-Term Easing

As widely expected, the Fed put into effect the first rate cut (of 25 bps) since 2008 in its Jul 30-31 meeting. However, the outlook issued by the central bank was considered hawkish as the Fed noted that the cut was simply a “midcycle adjustment” and that the committee does not see clear economic weakness that would require any longer rate-cutting cycle. Also, the Fed announced plans to end the normalization of balance sheet two months earlier than expected.

Thanks to such apparent hawkish comments, Wall Street slumped post the Fed meeting. Dollar gained and rate-sensitive sectors like Utilities Select Sector SPDR Fund XLU and gold bullion ETF SPDR Gold Shares GLD took a dive.

Tech Stocks Top Despite Antitrust Probe

The U.S. government announced that it has launched investigation into the largest U.S. tech companies for anticompetitive or monopolistic practices. The review could lead to antitrust charges or new laws for tech giants like Facebook FB, Amazon AMZN and Alphabet GOOGL.

But the sector’s underlying strength and upbeat earnings from a few FAANG stocks kept tech ETFs near record highs. The sector was leading in the month. Technology Select Sector SPDR Fund XLK was up 3.5% and First Trust Nasdaq Semiconductor ETF FTXL was up 7.4% — the best performer in the space. The beginning of the US-China trade talks contributed to the sector’s run (read: Tech ETFs Brush Aside Antitrust-Led Slump to Hit Highs).

Volley of Global Rate Cuts

Amid global growth concerns sparked by unceasing trade tensions, a rate cut cycle is in motion for many economies. Central banks in South Korea, Indonesia, Turkey and South Africa resorted to rate cuts in order to keep signs of a slowdown at bay. Massive rate cuts in Turkey made the country a winner in the month. iShares MSCI Turkey ETF TUR was up about 9.6%. However, other concerned country ETFs failed to record monthly gains.

Moderately Upbeat U.S. Economic Data Releases: Consumer ETFs Gain

The U.S. economy grew an annualized 2.1% in the second quarter of 2019, breezing past expectations of 1.8%, following a 3.1% uptick in the previous three-month period.Faster increases in household consumption and government spending led to the beat. U.S. retail sales also increased 0.4% sequentially in June, breezing past market expectations of a 0.1% rise. If this was not enough, after dropping to 124.3 in June, American consumer confidence bounced back to 135.7 in July, marking the highest level since November 2018.

Such upbeat consumer-related data bodes well for ETFs like iShares U.S. Consumer Goods ETF IYK (up 2.4% in the month), Invesco Dynamic Retail ETF PMR (up 2.9%), Consumer Staples Select Sector SPDR Fund XLP (up 2.3%) (read: Consumer Staples ETFs Beating Discretionary ETFs: Why?).

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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
Facebook, Inc. (FB) : Free Stock Analysis Report
 
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
 
Invesco Dynamic Retail ETF (PMR): ETF Research Reports
 
iShares U.S. Consumer Goods ETF (IYK): ETF Research Reports
 
iShares MSCI Turkey ETF (TUR): ETF Research Reports
 
Consumer Staples Select Sector SPDR Fund (XLP): ETF Research Reports
 
Technology Select Sector SPDR Fund (XLK): ETF Research Reports
 
SPDR Gold Shares (GLD): ETF Research Reports
 
Utilities Select Sector SPDR Fund (XLU): ETF Research Reports
 
iShares Russell Top 200 Growth ETF (IWY): ETF Research Reports
 
First Trust NASDAQ Semiconductor ETF (FTXL): ETF Research Reports
 
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