Rising Rates (TWTW – Jul 3-7, 2017)

And it is a 94% probability event … that the BoC will hike rates this week, on the back of a strong Canadian Employment number on Friday. State-side, the US also enjoyed a stronger than expected NFP number, with upward revisions to prior readings. All-in … Not good for bonds, where yields have continued to climb of late – in recognition of what looks to be a global movement away from ultra easy monetary conditions. Next up? Expectations that the FED will hike rates at least once more in 2017, AND that it will also begin to reduce its balance sheet. As for Europe – there too, the bias is to begin the process of removing ultra accomodative policies.

Will equity markets overall be able to withstand the negative headwind this represents going forward? With summer in full swing now, earnings season upon us – US banks, notably Citi; JP Morgan; and Wells Fargo all report this Friday, and the typically challenged month of September October ahead, it presumably wouldn’t take too much to cause some jitters … Let’s see how that plays out…

In the meantime:

  • G20 – Probably painful behind the scenes as far as Hamburg G20 Summit – one of the most anticipated highlights of which was a Putin/Trump face to face
  • Q2 earnings season ahead – expected to deliver 8% growth on 4.6% revenue growth (according to Barron’s) – versus earlier earnings growth expectations of 10.2% (as of April); respectively 11.9% back in January… All-in, according to Barron’s, a low threshold to beat now – and also a meaningful slowing from the Q1 pace of +15.3%… Q: does 8% still reflect a synchronized Global Expansion? Let’s find out!
  • North Korea – continuing to play dangerous games, the last episode of which being the launch of what was subsequently confirmed to be an ICBM
  • Oil – CITI – seeing oil rebound from here to USD60/barrel by year end.

Latest market numbers as seen through ETFs providing exposure to the most commonly referred to benchmarks:

ticker name change ticker name change ticker name change
XIU S&P/TSX 60 -0.63% PXG RAFI Global Fundamental -2.08% VCN FTSE Canada All Cap Index ETF -1.08%
XIC S&P/TSX Capped Composite -1.00% PXS RAFI US Fundamental Index -1.07% VCE FTSE Canada Index ETF -0.66%
CRQ RAFI CDN Fundamental -1.02% QQC/F NASDAQ 100 CAD Hedged 0.06% VUN CRSP US Total Market Index Unhedged -0.57%
XSP S&P 500 CAD Hedged 0.11% PZC RAFI CDN Small-Mid Fundam -1.66% VSP S&P 500 CAD Hedged 0.02%
XUS S&P500 -0.56% VXC FTSE All-World Ex Canada Index ETF -0.93%
XMU MSCI Min Vol US -0.79% XXM/b Morningstar US Value (Unh) -1.51% VEF FTSE Developed ex North-Am CAD H 0.08%
CLU RAFI US Fund 1000 CAD H -0.26% YXM/b Morningstar US Momentum (Unh) 0.13% VDU FTSE Developed ex North-America -1.22%
XSU Russell 2000 CAD Hedged 0.07% FXM Morningstar CDN Value -0.92% VE FTSE Developed Europe -0.67%
XIN MSCI EAFE CAD Hedged 0.20% WXM Morningstar CDN Momentum -0.87% VA FTSE Developed Asia Pacific -2.05%
XEH MSCI Europe IMI CAD H 0.38% VXM/b Morningstar Intl Value (Unh) -0.57% VEE FTSE Emerging Mkts -1.13%
XEC MSCI EM IMI -1.23% ZXM/b Morningstar Intl Momentum (Unh) -1.74% HAZ Active Global Dividends -0.80%
XMM MSCI Min Vol Emerging -1.30% RWE MSCI Europe Low Risk Weighted (H) -0.47% HHF Morningstar Hedge Fund Index -0.30%
CWO RAFI Broad Emerging -0.70% HMF Auspice Managed Futures -2.03%
CJP RAFI Fundam Japan CAD H 0.14% ZDJ Dow Jones CAD Hedged 0.30% HAC Seasonal Rotation -0.65%
CDZ CDN Div Aristocrats -0.84% ZEQ MSCI Europe High Quality CAD H -0.33% HPR Active Preferred Shares 0.75%
week of: July 3-7, 2017 OVERALL Source: ETFinsight/Bloomberg

Respectively through available “FACTORS” (Smart or Strategic Beta) ETFs:

ticker name change ticker name change
RAFI: Value: Yield:
CRQ RAFI CDN Fundamental -1.02% VXM/b Morningstar Intl Value (Unh) -0.57% CDZ iShares S&P/TSX Canadian Dividend Aristocrats Index ETF -0.84%
CLU RAFI US Fund 1000 CAD H -0.26% XXM/b Morningstar US Value (Unh) -1.51% XHU iShares US High Dividend Equity Index ETF -1.30%
CJP RAFI Fundam Japan CAD H 0.14% FXM Morningstar CDN Value -0.92% VGG Vanguard US Dividend Appreciation Index ETF -0.51%
CWO RAFI Broad Emerging -0.70% XCV iShares Canadian Value Index ETF -0.89% CUD iShares US Dividend Growers Index ETF CAD-Hedged -0.21%
PXG RAFI Global Fundamental -2.08% VVL Vanguard Global Value Factor Etf -0.50%
PZC RAFI CDN Small-Mid Fundam -1.66% Momentum:
YXM/b Morningstar US Momentum (Unh) 0.13%
Min Vol: ZXM/b Morningstar Intl Momentum (Unh) -1.74%
VVO Vanguard Global Minimum Volatility Etf -1.00% WXM Morningstar CDN Momentum -0.87% Multi-Factors:
XMW MSCI Min Vol World -1.23% VMO Vanguard Global Momentum Factor Etf -0.38% XFC iShares Edge MSCI Multifactor Canada Index ETF -1.31%
XMI MSCI Min Vol EAFE -1.86% Liquidity: XFS iShares Edge MSCI Multifactor USA Index ETF -1.32%
XMM MSCI Min Vol Emerging -1.30% VLQ Vanguard Global Liquidity Factor Etf -1.28% XFI iShares Edge MSCI Multifactor EAFE Index ETF -0.75%
XMU MSCI Min Vol US -0.79% Quality: Low Risk Weighted:
XMV MSCI Min Vol Canada -0.84% ZEQ BMO MSCI Europe High Quality Hedged To CAD Index ETF -0.33% RWE First Asset MSCI Europe Low Risk Weighted ETF -0.47%
week of: July 3-7, 2017 FACTORS / SMART BETA / STRATEGIC BETA Source: ETFinsight/Bloomberg

Check out the above table: More Factors, including Multi Factors, as well as Individual Factors on a Global basis, with more individual ETF solutions presented.

As well as the table below – which captures the latest as far as weekly performance for ETFs managed by Strategists, respectively wrapping several ETFs in one to solve for Conservative, Balanced, or Growth objectives:

ticker name change ticker name change ticker name change
HGM Horizons Managed Global Opportunities ETF -1.15%
EXGG Excel Global Growth Asset Allocation Etf -1.03% HAC Horizons Seasonal Rotation ETF -0.65%
EXGB Excel Global Balanced Asset Allocation Etf -0.94% HRA Horizons Global Risk Parity ETF -1.41%
HHF Horizons Morningstar Hedge Fund Index ETF -0.30%
DWG PowerShares DWA Global Momentum Index ETF 0.61%
HMA Horizons Managed Multi-Asset Momentum ETF 0.00%
XTR iShares Diversified Monthly Income ETF -0.44% XGR iShares Growth Core Portfolio Builder Fund -0.89%
FIE iShares Canadian Financial Monthly Income ETF 0.42% XCR iShares Conservative Core Portfolio Builder Fund -0.30%
ZMI BMO Monthly Income ETF -0.68% XGC iShares Global Completion Portfolio Builder Fund -0.89%
CBD iShares Balanced Income CorePortfolio Index ETF -0.73% FUT First Asset US Tactical Sector Allocation Index ETF 0.37%
ETP First Trust Global Risk Managed Income Index ETF -0.36% PRP Purpose Conservative Income Fund 0.44%
CBN iShares Balanced Growth CorePortfolio Index ETF -0.90%
XAL iShares Alternatives Completion Portfolio Builder Fund -1.03%
week of: July 3-7, 2017 ETF Strategists & ETFs of ETFs Source: ETFinsight/Bloomberg

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Weekly Volumes for the week of July 3-7, 2017:

weekly volume data:
Total Volume non-leveraged $4,262,347,538
top 10 Volume non leveraged $1,996,971,759
Total Volume leveraged $1,389,407,882
top 5 Volume leveraged $954,020,761
Total Volumes overall: $5,651,755,420
Top 10 + Top 5: $2,950,992,520
top 10 non leveraged % of total nl: 46.9%
top 5 leveraged % of total leveraged 68.7%
Top 10 + Top 5 as % of total traded: 52.2%

iShares – Koesterich: “Into Thin Air”

Vanguard –  McIntyre: Behavioural Finance and the psychology of investing

McNabb: The Ultimate Long term investors

First Asset – Launches a new ETF: The US TrendLeader Index ETF => Click HERE! Beyond this, a reminder that the A Series are reaching their due date this coming Friday (July 14th, 2007 targeted end date) => Click HERE

Horizons – Mark Noble on “looking beyond Canada and the US” => Click HERE!

ETFinsight – Monthly Perspectives, July 2017: Second Half? June continued to see record AUM levels for the Canadian ETF industry, underpinned by continued strong net inflows. Not contributing positively as far as June, however, were markets, and a strenghtening CAD, which detracted some CAD 1.8 Billion from aggregate net sales, to ultimately translate into a CAD 1.25Billion increase for the month. Overall, H1 saw record net inflows of some CAD 15.5 Billion, leaving H2 wide open for the industry to significantly surpass the record sales it generated in 2015/2016.

H1 in “Factors” – Looked like … THIS:

factors at the half way mark CanadaFactors at the half way mark US

and

factors at the half way mark international global

How will the various factors fare in H2? Which one will come to dominate?

Top and Bottom performing ETFs for the week of July 3-7, 2017:

Ticker Name % Change Avg Price Weekly Volume $ Volume traded
Top Performers week of July 3-7, 2017
HUV CN Equity BetaPro S&P 500 VIX Short-Term Futures ETF 4.05% $9.16 48,566 $450,742
ZUB CN Equity BMO Equal Weight US Banks Hedged to CAD Index ETF 1.75% $26.71 670,538 $17,912,407
FHB CN Equity First Asset European Bank ETF 1.55% $9.17 22,486 $205,665
BANK CN Equity BMO Global Bank Hedged to CAD Index ETF 1.52% $20.67 38,317 $783,768
FLI CN Equity First Asset U.S. & Canada Lifeco Income ETF 1.34% $12.80 127,584 $1,632,448
ZBK CN Equity BMO Equal Weight US Banks Index ETF 1.20% $24.41 1,036,631 $25,093,357
VXM CN Equity First Asset Morningstar International Value Index ETF 1.13% $24.15 6,388 $153,786
XBM CN Equity iShares S&P/TSX Global Base Metals Index ETF 1.11% $11.00 27,590 $302,819
CEW CN Equity iShares Equal Weight Banc & Lifeco ETF 1.08% $12.09 59,651 $720,529
XID CN Equity iShares India Index ETF 1.05% $33.66 18,016 $606,265
Bottom Performers
ZJG CN Equity BMO Junior Gold Index ETF -4.18% $8.43 309,432 $2,600,610
XEG CN Equity iShares S&P/TSX Capped Energy Index ETF -4.30% $10.74 15,900,647 $169,489,460
XGD CN Equity iShares S&P/TSX Global Gold Index ETF -4.52% $11.93 5,357,255 $63,763,412
HEE CN Equity Horizons Enhanced Income Energy ETF -4.77% $11.89 32,091 $379,107
CCX CN Equity Auspice Canadian Crude Oil Index ETF -5.01% $8.05 88,241 $717,609
ZGD CN Equity BMO S&P/TSX Equal Weight Global Gold Index ETF -5.38% $9.44 82,205 $773,045
ZIC CN Equity BMO Mid-Term US IG Corporate Bond Index ETF -5.96% $18.81 1,703,642 $32,852,337
ZJO CN Equity BMO Junior Oil Index ETF -5.97% $11.84 89,817 $1,061,206
HUZ CN Equity Horizons Silver ETF -6.32% $9.04 189,873 $1,724,660
SVR/C CN Equity iShares Silver Bullion ETF -7.42% $8.20 102,023 $847,048

Top Performing ETFs – Perhaps it is rather fitting to see Financials, most notably Banks lead the pack on expectations of higher rates, all the while volatility also picks up … If anything, isn’t that a reminder that while rising rates should probably be welcomed as meaning the powers that be deem the recovery to be on solid footing enough to be able to withstand said higher rates? On the other hand … what if it can’t …

Bottom Performing ETFs – On the flipside of market action this past week, Golds demonstrated if it was needed that they do not very much like the prospect of higher rates … while the Energy sector confirmed that all else equal … the stronger oil forecast CITI has would be much preferred. So in essence, if volatility were to pick up markedly, alongside some market turmoil accompanying rates all the while oil actually recovered … you would have two areas where one could consider hiding perhaps from now until … the Sept/Oct period?

Last week’s Sector Performance:

sector performance week ending june 30, 2017

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