Image Source: Pexels

The first trading week of September began with volatility but closed more moderately as markets digested economic data and sector-specific news. Technology, small caps, and gold miners stood out as leaders while energy lagged.  

ETF Performance

Current ValuEngine reports on all covered stocks and ETFs can be viewed at here

Top 3 Stock Performers (Global)  

Top 3 Stock Performers (US)  

Strategy Note:

The first week of September came in like a lion but left far more quietly in the holiday shortened week. Significant losses in the major US indexes on Tuesday were followed by mild rebounds on Wednesday and Thursday and a mixed Friday.

Breaking down the market into its most-followed components, it was a strong week for the tech-heavy Invesco QQQ Trust (QQQ) following the Nasdaq-100. The closely followed ETF gained more than 1.1% for the week with gains buoyed by strong reports by Alphabet (GOOGL) and Apple (AAPL). There was also a major announcement affecting QQQ shareholders as Invesco is looking to change its existing trust structure, a legacy from its founding days to the more efficient and cost-effective fund structure used by most ETFs today. A potential benefit to shareholders if the proxy referendum is approved is that the expense ratio will be lowered from 0.20% to 0.18%. Invesco claims this will take its P&L for QQQ from break-even to marginally profitable while providing the benefits of marginally lower costs and marginally higher returns for fund shareholders.

Another asset-class-index ETF, iShares Core Small Cap ETF (IJR), continued its recent rebound, returning 0.9% for the week. Midcap stocks had an even better week with a 1.3% gain by SPDR S&P Midcap Index Trust (MDY). Indeed, the midcap and small cap S&P indexes outperformed their large cap bellwether this week as its top-traded ETF, SPDR S&P 500 Index Trust (SPY), gained 0.33%, still better than DIA, the legacy ETF following the Dow Jones Industrial Average, which finished down 0.3%.

Global stocks also finished in the black with iShares MSCI EAFE Index (EFA), representing developed international markets, up 0.5%, while iShares MSCI Emerging Markets ETF (EEM) rose 1.2%.

As robust as most of these ETFs were in the first trading week of September, none of these stock index ETFs came close to keeping up with GLD, the SPDR Gold Trust, which surged 4% as gold futures reached a new all-time high of $139.50 per Troy ounce. Gold miners climbed even higher: the VanEck Gold Miners ETF (GDX) rose 5%.

Despite gold’s strength, ValuEngine’s predictive performance model sees more outperformance ahead for two of the largest individual holdings of GDX. Newmont Mining (NEM) receives a 4 (Buy), while Barrick (GOLD) gets our highest rating of 5. Still, academic research by Campbell Harvey and Claude Erb suggests gold is significantly overvalued compared to the U.S. CPI, often followed by extended declines, as seen in the 1980s and post-2011. ValuEngine’s valuation model also flags B and NEM as overvalued relative to 70% of its coverage universe. Given the high volatility and historically elevated valuations, cautious optimism may be warranted.

More By This Author:

Weekly Strategy Update - Equities Continue To Show Signs Of Rotation
Bulge Bracket US Finance Firms Look Strong - Global Banks Look Even Stronger
Weekly Strategy Update - Tech Gets The Headline Winners As Finance Continues To Roll