Long Term Vs. Short Term

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ETF investing, Portfolio Strategy, Deep Value

Contributor Since 2018

ETFG Research Philosophy: ETF Global provides independent and objective research enabling investors to generate superior risk-adjusted returns balanced by disciplined risk management. Developed over many years, the ETF Global dynamic, quantitative research models integrate Fundamental Analysis, Behavioral Finance, Global Sentiment, Qualitative Evaluation and Risk Management. Our proprietary models find the important connections between several disciplines to generate superior returns.

Monday, January 14, 2019 - Stocks finished higher for the third straight week, with Small-Cap and International markets outperforming. For the week, the DJIA was up 562.79 points, the S&P 500 rose 64.32 points, while the NASDAQ Composite gained 232.62 points.

The market gains helped make the Russell 2000 Index the last major benchmark to emerge from bear market territory. Within the S&P 500 Index, Industrial shares performed best, helped by strength in railroads and a sharp rise in Boeing. Energy shares were also especially strong for much of the week as oil prices rallied, although they gave back a portion of their gains on Friday. Financials lagged and Health Care stocks also underperformed despite the news of another large merger in the sector—Eli Lilly’s proposed $8 billion acquisition of Loxo Oncology. Volatility continued to moderate, with the Cboe Volatility Index (VIX) hitting its lowest level in over a month, while higher-valued growth stocks outperformed slower-growing value shares.

Stocks have staged a healthy rally in the past two weeks, rewarding investors that stayed calm in the face of December's panic. This highlights the importance of a longer-term perspective, as some of the market's best days often come on the heels of its worst. For example, the late-December sell-off included the worst two-day decline (-4.8%) since 2015, which was followed the very next day by the best daily gain (+5.0%) since March 2009. We have now experienced four corrections (declines of 10% or more) in the past four years, directly in line with the average since 1900 of one correction per year.

It's a reminder that despite the uncomfortable nature of market pullbacks, volatility is in fact a normal part of investing. Being a long-term investor does not require you to ignore shifts in the market, but it does require perspective and discipline. In General, stocks are now up 10.4% from their December lows, having recouped more than 40% of the total decline. Looking at the 10%-plus pullbacks since 2010, the market regained the entire drop in an average of 90 days. This is no guarantee that recent losses will be erased in such short order, but the rally over the past few weeks is a reminder that the decline in December may not be a one-way path toward a severe bear market.

ETFG Quant Movers – those ETFs who have had the largest weekly change in their respective, overall ETFG Quant ratings: 

ETFG Quant Winners: Invesco S&P International Developed Momentum ETF (IDMO) took the number one spot up 14.95 points and a score of 54.38. iShares Edge MSCI Intl Size Factor ETF (ISZE) gained 13.78 points to end with a Quant score of 55.16. Invesco S&P 500 Minimum Variance ETF (SPMV) posted a solid gain in score moving up 13.65 points to a score of 55.93. Rounding out the Top Five were Oppenheimer Russell 1000 Quality Factor ETF (OQAL) and Dorsey Wright MLP Index ETN (BMLP) which rose 13.58 and 13.17 points respectively.

ETFG Quant Losers: This week’s biggest loser was Invesco S&P International Developed Low Volatility ETF (IDLV) dropping 10.68 points to a 50.56 Quant score. VictoryShares US EQ Income Enhanced Volatility ETF (CDC) fell 9.67 points to 40.01. VanEck Vectors Gaming ETF (BJK) declined 9.54 points to 41.21. iShares MSCI Italy ETF (EWI) moved down 9.49 points to 53.01. Ending out the bottom five is Invesco BLDRS Developed Markets 100 ADR Index Fund (ADRD) down 9.44 points to 45.97.

ETFG Weekly Select List - the five most highly rated ETFs per Sector, Geographic Region and Strategy as ranked by the ETFG Quant model.

Because of the sectors success on the 1W Quant Rating of the ETFG Heat Map, we’d like to highlight some substantial movement in the Technology Sector when comparing this week’s Select List to last. SPDR FactSet Innovative Technology ETF (XITK) takes the number one spot as a newcomer, unranked last week. Dropping one spot down to second was last week’s top pick First Trust Nasdaq Semiconductor ETF (FTXL). Global X FinTech Thematic ETF (FINX), ALPS Disruptive Technologies ETF (DTEC) and iShares North American Tech-Multimedia Networking ETF (IGN) round out this week’s Technology Sector Select List. Keep an eye on our Weekly Select List for crucial insights as investors continue to turn to ETPs for portfolio diversification and security in these volatile markets.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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