/Thank You Boom Boom Powell

Thank You Boom Boom Powell

Monday, January 7, 2019 – We would like to start the New Year by saluting a new entrant into the world of Google search, “Boom Boom Powell.”  A search of the term brings up a number of sports celebrities, WWI and WWII pilot and Navy Veterans and now Jerome Powell, the honorable Fed Chairman, thanks to the folks at Morning Brew who popularized the term.  JP earned his new nickname from comments he made on Friday relieving investors’ fear that he would pull the “Greenspan Plug” to backstop the equity markets in a severe decline. This resulted in a strong one-day rally with the Dow surging some 3.3% and other major indexes sharing similar upward moves.

The first week of 2019 was another roller coaster ride for investors. The markets played a tug of war but US Equity Markets managed to end the week in positive territory.  The Large Cap weighted S&P 500 closed at 2,531.94 and the broader NASDAQ Composite closed at 6,738.86 for a weekly jump of 1.86% and 2.34 %.
Helping to move the major indexes on Boom Boom’s comments was an unexpectedly strong jobs report despite a rise in unemployment claims and the announcement of renewed trade discussions with China. Investor sentiment remains cautious as concerns ranging from the economic fallout from an ongoing government shutdown, increased questioning of corporate earnings quality, confidence in the current administration, stability in the oil markets, credit concerns and Brexit which appears to be headed for a hard landing. Investors seem to have given pause that a global slowdown could be avoided.
We think investors sentiment has markedly shifted and will remain cautious for good reason. First, Lu Wang at Bloomberg wrote yesterday in her insightful article titled “Dip Buyers Beware the S&P 500 Bottoming Process Can Take Time” that bear markets typically last some 8 months but can be characterized by strong violent rallies as stocks struggle to regain their footing. We agree with her. The numbers are the numbers.
As our friends at Barron’s pointed out in an interview with Stephanie Pomboy, founder of MarcoMavens, the bull market has largely been supported by stock buybacks and a small number of tech stocks driving the indexes. She points out that since 2011, the S&P 500 EPS has risen by 67% while aggregate US corporate profits only rose by 23%, according to the US Bureau of Economic Analysis.  Is there a “bubble” in buyback-inflated earnings? What happens if there is a slowdown and firms pull-back on the stock repurchase plans? We also noted an interesting article by a Richard Phillips in the well-respected beltway publication, The Globalist, https://www.theglobalist.com/us-stock-market-federal-reserve-economy/ who asks if the increased volatility is symbolic of deteriorating confidence in US Institutions?
We expect market volatility to continue for some time as the investors calculate the impact of new trade regimes, fallout from the ongoing govt shutdown and general political instability worldwide. This creates opportunities for traders and active investors who can use ETFs to take advantage of real-time market volatility – both up and down!
ETFG Weekly Select List – To best support the ETF selection process, The ETFG Weekly Select List highlights the 5 most highly rated ETFs per Sector, Geographic Region and Strategy as ranked by the ETFG Quant model.  We highlight a couple of ETFs that attracted our attention.
Long term investors should look at OIH in the Energy Sector which continued to share our top rating as does NFRA in Natural Resources and FUTY in Utilities. For the more adventurous investor/trader, IYZ in Telecoms jumped from 4 to 1.  For those seeking plays in emerging markets, EMIF and TUR for a Turkish play and EZA for the Middle East & Africa continue to hold our highest ratings.
Today’s market realities require a new approach to macro investing, one in which individual investors now have access to tools via ETPs to customize risk and return profiles in their portfolios. We suggest keeping a mindful eye on tools like our Select List, Scanner, ETFG Quant Scores and Risk and Reward Ratings that can be used to evaluate the vast set of opportunities in the ETF marketplace.
Thank you for reading ETF Global Perspectives!
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Assumptions, opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice.  ETF Global LLC (“ETFG”) and its affiliates and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively ETFG Parties) do not guarantee the accuracy, completeness, adequacy or timeliness of any information, including ratings and rankings and are not responsible for errors and omissions or for the results obtained from the use of such information and ETFG Parties shall have no liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of such information. ETFG PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE.  In no event shall ETFG Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the information contained in this document even if advised of the possibility of such damages.

ETFG ratings and rankings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities or to make any investment decisions. ETFG ratings and rankings should not be relied on when making any investment or other business decision.  ETFG’s opinions and analyses do not address the suitability of any security.  ETFG does not act as a fiduciary or an investment advisor.  While ETFG has obtained information from sources they believe to be reliable, ETFG does not perform an audit or undertake any duty of due diligence or independent verification of any information it receives.

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This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.  Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue.  Prices, values, or income from any securities or investments mentioned in this report may fall against the interests of the investor and the investor may get back less than the amount invested.  Where an investment is described as being likely to yield income, please note that the amount of income that the investor will receive from such an investment may fluctuate.  Where an investment or security is denominated in a different currency to the investor’s currency of reference, changes in rates of exchange may have an adverse effect on the value, price or income of or from that investment to the investor.

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