Small-cap stocks are struggling to keep up with large-cap stocks. Growth ETFs are yielding ground to value ETFs. And now ... U.S. Sector ETFs are losing out to Global Sector ETFs.
The “Risk Rally” that once favored emerging market corporations and smaller companies could be transforming. Buyers may still be interested in equities, but they are now snapping up big-name corporations and beaten-down developed market stocks. In fact, the interest in beaten-down entities from Europe and Japan ... in addition to U.S. mega-cap intrigue ... has provided global sector investors with a much-needed lift.
Consider the head-to-head comparisons between U.S. Sector ETFs and Global Sector ETFs. In six out of nine match-ups, the global alternative reigned supreme. Moreover, the biggest disparities are in economically sensitive areas like technology, energy and financials.
|1-Month Rolling Returns for U.S. Sectors and Global Sectors|
|iShares Global Energy (IXC)||5.7%|
|Energy Select Sector SPDR (XLE)||4.6%|
|iShares S&P Global Financials (IXG)||5.6%|
|Financials Select Sector SPDR (XLF)||4.1%|
|iShares S&P Global Utilities (JXI)||4.5%|
|Utilities Select Sector SPDR (XLU)||2.4%|
|iShares S&P Global Industrials (EXI)||3.6%|
|Industrials Select Sector SPDR (XLI)||3.1%|
|iShares S&P Global Technology (IXN)||2.8%|
|Technology Select Sector SPDR (XLK)||1.9%|
|iShares S&P Global Healthcare (IXJ)||1.4%|
|Health Care Select Sector SPDR (XLV)||1.9%|
|iShares S&P Global Consumer Discretion (RXI)||0.7%|
|Consumer Discretion Select SPDR (XLY)||0.2%|
|iShares Global Consumer Staples (KXI)||-0.7%|
|Consumer Staples Select SPDR (XLP)||0.8%|
|iShares S&P Global Materials (MXI)||-1.8%|
|Materials Select Sector SPDR (XLB)||-1.5%|
Although you do not want to find yourself on a performance-chasing expedition, the strategy of riding U.S. equities and emerging market equities alone may begin to fail you; that is, a global approach that incorporates funds like iShares Global 100 (IOO), Vanguard Europe Pacific (VEA) and higher-beta global sectors like iShares Global Energy (IXC) may be necessary for stronger portfolio returns.
Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships.