Suppressing Decoherence (TWTW – July 10-14, 2017)

Suppressing DecoherenceA Quantum Computing concept that capture well the essence of what Central Bankers face going forward as they push ahead with a long overdue normalization …

Getting out from under the massive damage inflicted by the 2008/2009 Global Financial crisis has proven no small feat, and any glitches from here could demonstrate that again … That said – the consensus looks to be solidly in the “stall speed” no longer a risk camp.

Recent Developments:

  • The Bank of Canada – Made good Wednesday on delivering a 25 bps hike – as recently guiding toward. The remaining question: hawkish or dovish, had the answer at hawkish – with odds of a further hike in October through 60%
  • Janet Yellen – While the BoC’s decision and accompanying statement was interpreted as Hawkish, Yellen’s Semi-Annual testimony to Senate was deemed Dovish – which helped push stocks higher in the week.
  • Witch Hunt – Nothing to see here re: Trump collusion with Russia … And yet … one Donald Jr this past week came clean regarding a meeting with Russian contacts that was to deliver dirt on Hillary Clinton. Anyone would have taken that meeting said Sr praising his son’s “transparency”  … Or as Talk Show Hosts like to put it … TO THE FBI.
  • The Trumps – Sought reprieve, of all places, in France which marked Bastille day on Friday. If this clip from Stephen Colbert has it right – the President did himself proud there, by objectifying the French President’s wife… Baaad Donald, as Stephen admonished.
  • JPMorgan – Beat earnings expectations, reached record profits, despite trading coming in lower than forecast. Lower Net Interest Margin guidance, however, saw the stock pullback somewhat Friday… CEO Jamie Dimon vented on the earnings call that: “What I’m saying is, it will be much stronger growth had we made intelligent decisions and we were not gridlocked,” he said, noting that “we are unable to build bridges; we’re unable to build airports.”
  • Bank of America and Goldman Sachs – Report their quarterly earnings Tuesday. (Morgan Stanley Wednesday…)
  • former Brazilian President Lula – is heading to jail for up to 10 years…
  • Barron’s – This week end is titled “Big Oil” and has Suncor and Canadian Natural Resources as stocks to consider as stocks in the sector could rise either on a commodity rebound and improved prospects, or simply as a result of investors bottom fishing a sector that has significantly lagged thus far in 2017… Combined, SU and CNQ account for 45% of XEG (iShares S&P/TSX Capped Energy ETF), and 17% of ZEO (BMO S&P/TSX Equal Weight Oil and Gas ETF)
  • Canada’s PM Justin Trudeau – makes the case to VP Pence and US States Governors for thinner border, as opposed to thicker – for trade, as NAFTA renegotiations process kicks into higher gear Monday, with US expected to release its objectives for the renegotiations then.
  • BlackRock Strategist Reiman – sees Canadian Equities as relatively cheap, likes Tech and Healthcare => Click HERE!

 

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 0.95% PXG RAFI Global Fundamental 0.37% VCN FTSE Canada All Cap Index ETF 1.15%
XIC S&P/TSX Capped Composite 1.05% PXS RAFI US Fundamental Index -0.73% VCE FTSE Canada Index ETF 1.01%
CRQ RAFI CDN Fundamental 1.50% QQC/F NASDAQ 100 CAD Hedged 3.11% VUN CRSP US Total Market Index Unhedged -0.53%
XSP S&P 500 CAD Hedged 1.34% PZC RAFI CDN Small-Mid Fundam -0.10% VSP S&P 500 CAD Hedged 1.35%
XUS S&P500 -0.44% VXC FTSE All-World Ex Canada Index ETF 0.15%
XMU MSCI Min Vol US -0.96% XXM/b Morningstar US Value (Unh) 0.49% VEF FTSE Developed ex North-Am CAD H 1.15%
CLU RAFI US Fund 1000 CAD H 1.11% YXM/b Morningstar US Momentum (Unh) 0.38% VDU FTSE Developed ex North-America 0.54%
XSU Russell 2000 CAD Hedged 0.83% FXM Morningstar CDN Value 1.92% VE FTSE Developed Europe 0.43%
XIN MSCI EAFE CAD Hedged 1.16% WXM Morningstar CDN Momentum 1.76% VA FTSE Developed Asia Pacific 0.82%
XEH MSCI Europe IMI CAD H 1.34% VXM/b Morningstar Intl Value (Unh) 0.46% VEE FTSE Emerging Mkts 2.86%
XEC MSCI EM IMI 3.17% ZXM/b Morningstar Intl Momentum (Unh) -0.25% HAZ Active Global Dividends -0.35%
XMM MSCI Min Vol Emerging 1.59% RWE MSCI Europe Low Risk Weighted (H) 1.05% HHF Morningstar Hedge Fund Index 1.12%
CWO RAFI Broad Emerging 2.75% HMF Auspice Managed Futures -3.69%
CJP RAFI Fundam Japan CAD H -0.34% ZDJ Dow Jones CAD Hedged 1.12% HAC Seasonal Rotation 0.49%
CDZ CDN Div Aristocrats 0.39% ZEQ MSCI Europe High Quality CAD H 1.37% HPR Active Preferred Shares 0.11%
week of: July 10-14 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 1.50% VXM/b Morningstar Intl Value (Unh) 0.46% CDZ iShares S&P/TSX Canadian Dividend Aristocrats Index ETF 0.39%
CLU RAFI US Fund 1000 CAD H 1.11% XXM/b Morningstar US Value (Unh) 0.49% XHU iShares US High Dividend Equity Index ETF -1.09%
CJP RAFI Fundam Japan CAD H -0.34% FXM Morningstar CDN Value 1.92% VGG Vanguard US Dividend Appreciation Index ETF -1.13%
CWO RAFI Broad Emerging 2.75% XCV iShares Canadian Value Index ETF 1.56% CUD iShares US Dividend Growers Index ETF CAD-Hedged 0.60%
PXG RAFI Global Fundamental 0.37% VVL Vanguard Global Value Factor Etf -0.28%
PZC RAFI CDN Small-Mid Fundam -0.10% Momentum:
YXM/b Morningstar US Momentum (Unh) 0.38%
Min Vol: ZXM/b Morningstar Intl Momentum (Unh) -0.25%
VVO Vanguard Global Minimum Volatility Etf 1.40% WXM Morningstar CDN Momentum 1.76% Multi-Factors:
XMW MSCI Min Vol World -0.64% VMO Vanguard Global Momentum Factor Etf 0.34% XFC iShares Edge MSCI Multifactor Canada Index ETF 1.55%
XMI MSCI Min Vol EAFE 0.09% Liquidity: XFS iShares Edge MSCI Multifactor USA Index ETF -0.63%
XMM MSCI Min Vol Emerging 1.59% VLQ Vanguard Global Liquidity Factor Etf 0.03% XFI iShares Edge MSCI Multifactor EAFE Index ETF 0.31%
XMU MSCI Min Vol US -0.96% Quality: Low Risk Weighted:
XMV MSCI Min Vol Canada 0.84% ZEQ BMO MSCI Europe High Quality Hedged To CAD Index ETF 1.37% RWE First Asset MSCI Europe Low Risk Weighted ETF 1.05%
week of: July 10-14 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 0.68%
EXGG Excel Global Growth Asset Allocation Etf 0.17% HAC Horizons Seasonal Rotation ETF 0.49%
EXGB Excel Global Balanced Asset Allocation Etf 0.08% HRA Horizons Global Risk Parity ETF 1.43%
HHF Horizons Morningstar Hedge Fund Index ETF 1.12%
DWG PowerShares DWA Global Momentum Index ETF -0.74%
HMA Horizons Managed Multi-Asset Momentum ETF 0.00%
XTR iShares Diversified Monthly Income ETF 0.62% XGR iShares Growth Core Portfolio Builder Fund 0.72%
FIE iShares Canadian Financial Monthly Income ETF 0.41% XCR iShares Conservative Core Portfolio Builder Fund 0.13%
ZMI BMO Monthly Income ETF -0.19% XGC iShares Global Completion Portfolio Builder Fund 0.50%
CBD iShares Balanced Income CorePortfolio Index ETF 0.46% FUT First Asset US Tactical Sector Allocation Index ETF 1.19%
ETP First Trust Global Risk Managed Income Index ETF 0.36% PRP #N/A #N/A
CBN iShares Balanced Growth CorePortfolio Index ETF 1.01%
XAL iShares Alternatives Completion Portfolio Builder Fund 0.90%
week of: July 10-14 2017 ETF Strategists & ETFs of ETFs Source: ETFinsight/Bloomberg

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Weekly Volumes for the week of July 10-14, 2017:

weekly volume data:
Total Volume non-leveraged $5,149,702,517
top 10 Volume non leveraged $2,626,820,252
Total Volume leveraged $1,596,618,974
top 5 Volume leveraged $1,100,116,800
Total Volumes overall: $6,746,321,491
Top 10 + Top 5: $3,726,937,052
top 10 non leveraged % of total nl: 51.0%
top 5 leveraged % of total leveraged 68.9%
Top 10 + Top 5 as % of total traded: 55.2%

iShares – ETF terminations – Read More: Click HERE!

July 2017 Distributions – > Click HERE!

BlackRock Institute: Mid-Year 2017 Investment Outlook => Click HERE!

Vanguard –  Change at the top – CEO Bill McNabb departing Jan 1, 2018 => Click HERE!

First Asset – Value versus Momentum – Value ahead for the week of July 10-14 across Canada, US and International ETFs.  A Series with Advisors Series having reached their earlier announced termination date of July 14th, 2007 => Click HERE expect a press announcement imminently confirming exchange ratios into common Series.

Horizons –Thackray’s Newsletter July 2017: Yellen isn’t your BFF

Second ETF company to do away with PACCs and SWPs – Innovation Rollback? My take? While not a + as these tools are disappearing from the options available to investors – all this likely means in this instance (and for the earlier announcement whereby First Asset also eliminated them … – is that there simply wasn’t enough use or demand for them. DRIPs remain! Click HERE for Press release!

On another note: in the same press release, the distribution frequency of several ETFs moves from monthly to quarterly. Is that a nod to interest rates normalization? In a way, if you recall, what earlier introduced monthly distributions into the mix was investors’ insatiable appetite for cash flows and yield, fed via Income Trust monthly drip (not the dividend reinvestment kind … the $$$ monthly drip that got everyone even more addicted …). Anyways – in the grand scheme of things, neither here nor there, but likely some cost saving for Horizons … AND if rates rise, well, cash balance sitting at Horizons also a + for them…

ETFinsight – iShares announces some ETFs closures => Click HERE!

as a reminder, in the first half of 2017, performance on the part of “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?

I have heard some expressing a view that Value would make a comeback while the ideal backdrop momentum benefited from in H1 may fade. Quality is another I have seen mentioned as likely to continue to be sought after …

What are your thoughts?

Top and Bottom performing ETFs for the week of July 10-14 2017:

Ticker Name % Change Avg Price Weekly Volume $ Volume traded
Top Performers week of July 10-14, 2017
CCX CN Equity Auspice Canadian Crude Oil Index ETF 7.59% $8.06 61,210 $500,006
ZMT CN Equity BMO S&P/TSX Equal Weight Global Base Metals Hedged to CAD Index ETF 6.78% $10.14 158,851 $1,605,284
XBZ CN Equity iShares MSCI Brazil Index ETF 6.27% $12.59 52,542 $668,862
CBQ CN Equity iShares BRIC Index ETF 5.89% $23.09 21,564 $498,752
XBM CN Equity iShares S&P/TSX Global Base Metals Index ETF 5.65% $11.37 198,987 $2,276,181
HMMJ CN Equity Horizons Marijuana Life Sciences Index ETF 5.37% $8.65 645,561 $5,584,603
ZJO CN Equity BMO Junior Oil Index ETF 4.41% $11.71 97,589 $1,140,300
XCH CN Equity iShares China Index ETF 4.21% $25.02 50,430 $1,268,424
HNY CN Equity Horizons Natural Gas Yield ETF 4.17% $12.82 55,125 $706,796
XEM CN Equity iShares MSCI Emerging Markets Index ETF 3.71% $30.28 224,452 $6,819,765
Bottom Performers
ZLU CN Equity BMO Low Volatility US Equity ETF -1.15% $29.30 1,010,797 $29,595,332
ZPW CN Equity BMO US Put Write ETF -1.31% $18.32 193,975 $3,550,268
ZIC CN Equity BMO Mid-Term US IG Corporate Bond Index ETF -1.46% $18.46 227,228 $4,196,895
FHU CN Equity First Trust AlphaDEX US Utilities Sector Index ETF -1.52% $23.48 16,905 $393,500
ZUP CN Equity BMO US Preferred Share Index ETF -1.53% $25.31 31,724 $798,382
USB CN Equity PowerShares LadderRite US 0-5 Year Corporate Bond Index ETF -1.59% $22.56 10,781 $242,594
DLR CN Equity Horizons US Dollar Currency ETF -1.76% $12.73 2,599,855 $33,109,977
PUD/B CN Equity Purpose US Dividend Fund -1.82% $25.12 22,874 $571,968
ZBK CN Equity BMO Equal Weight US Banks Index ETF -2.74% $24.17 370,376 $8,916,640
HUV CN Equity BetaPro S&P 500 VIX Short-Term Futures ETF -8.66% $8.82 73,286 $644,786

Top Performing ETFs – Crude continuing to bounce, a better tone to materials overall, and resilient EM all symptomatic of generally positive stance toward markets at present – despite seasonal challenges possibly, respectively liquidity conditions often being sub-optimal in the summer … that, and of course, continued political saga in Washington, geopolitical risk re: N-Korea, etc …

Bottom Performing ETFs – Notable that US Banks weakened despite Yellen’s positive outlook on the economy, despite loan growth (but likely in part due to a) markets anticipating good results already … and b) negative offset of weak trading activity).

Other – Preferreds, in this environment of further normalization, should continue to do well – Horizons is holding a confcall on Jul 25th, with PM Nicolas Normandeau from Fiera, to discuss their outlook => Click HERE!

for his part, the Globe’s Rob Carrick described them as a surprise ally on July 13th: Click HERE! 

and still … no sustained volatility spike, in fact volatility retreated last week…

Last week’s Sector Performance:

modest negative on the week for utes, notable, in that BoC seen as “hawkish”

elsewhere – main drivers of Canadian markets – financials, energy and materials all up – reflation trade is on …

sector performance week ending july 14, 2017

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