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Weekly Edge: As S&P Nears Highs, Investors Remain Wary

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by: Invest With An Edge
Summary

The average momentum score for the Sector Benchmark ETFs increased from 24.18 to 25.00.

Among the Factor Benchmark ETFs, the average factor score increased from 24.83 to 26.33.

The average Global Benchmark ETF momentum score decreased from 24.18 to 22.45 for the week.

The S&P closed less than 1% away from the September 2018 high of 2,930.75 on Tuesday, but some investors are still skittish. At the end of 2018, the index experienced its worst quarter in seven years after tumbling on concerns about global economic growth, reports The Wall Street Journal. This was followed by its best quarter in six years, during which the index gained 16%.

Yet, last year's volatility still seems to be on the minds of some investors. According to the Journal, "investors have poured a record amount of cash into so-called smart funds that try to protect against another downturn."

But with record amounts of cash on hand and investors' fear of potentially missing out on an upward market move, BlackRock (NYSE:BLK) CEO Larry Fink believes a surge to the upside is more likely than a meltdown at this point. As good as that may sound, this kind of "meltup" is usually followed by a market setback; meltups are not necessarily driven by market fundamentals.

On the global economic front, the tariff war between China and the U.S. has impacted stocks in many industries in the last year. Economists believe tariff wars cause GDP growth to decrease for both parties involved, due to reduced exports and higher costs. As trade negotiations have progressed, and a deal becomes more likely, these concerns should subside.

China just released its first-quarter GDP growth rate, which held at 6.4%, according to the Journal. This beat expectations of a 6.3% growth rate. China has taken initiative in the past few months to stimulate its economy, and it seems to be paying off. Meanwhile, in the U.S., the trade deficit hit its lowest level since June 2018, falling to $49.4 billion in February. CNBC reports there was a 28.2% decrease in the goods deficit with China. Fruitful conversations between China and the U.S. may result in further boosts to both economies.

While the S&P is still struggling around the neutral zone Wednesday morning, investors have a few things to be optimistic about. Negotiations between China and the U.S. are coming along well, which may lead to improvement in GDP growth. Where some people are predicting the next melt up or meltdown, others are keeping their attention on market fundamentals and economic policies.

Sectors: The average momentum score for the Sector Benchmark ETFs increased from 24.18 to 25.00. Momentum increased for six of the 11 sectors last week. The momentum score for Financials jumped 12 points after a good earnings season, moving the sector from 10th place to sixth. Technology remained the top sector while Health Care remained at the bottom, losing 15 points.

Factors: Among the Factor Benchmark ETFs, the average factor score increased from 24.83 to 26.33. Momentum increased for all but four of the factors last week. The scores for Value and High Beta increased the most, up by 6. High Beta and Quality remain in the top two spots. Momentum fell two spots to last place after a 2-point decrease.

Global: The average Global Benchmark ETF momentum score decreased from 24.18 to 22.45 for the week. Momentum in the global sector decreased in six of the 11 regions. Latin America had the largest decrease, losing 17 points. China held on to the top spot, while Eurozone tied for second place after a 5-point increase.

Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.