The ETF Portfolio Strategist: Saturday, May 1

US junk bonds continued to rise, too. SPDR Barclays US High Yield Bond ETF (JNK) has rallied for six straight weeks. The rally appears to be wearing thin, however. Maybe that’s because interest rates are showing signs of rising again after a brief hiatus and the yield premium on junk is close to a 14-year low.

Note, too, that the benchmark 10-year Treasury yield posted its first weekly rise this month, edging up to 1.65%.

Not surprisingly, bonds (at least in the investment-grade bucket) lost ground this week. The iShares 7-10 Year Treasury Bond ETF (IEF) fell 0.5%, fueling new concern that the respite from a long string of weekly losses is ending.

Meantime, US stocks had the mildest of setbacks this week – Vanguard Total US Stock Market (VTI) slipped fractionally, marking the first weekly loss (just barely) since mid-March.

The big loser on our list of global proxies this week: stocks in Japan via iShares MSCI Japan (EWJ), which gave up a hefty 2.4%. The loss left the fund essentially at the lower bound of the trading range for the year to date. If EWJ trades lower next week, technically speaking the setback would look relatively dark for the ETF’s near-term outlook. Another week of selling looks plausible, even likely if you consider that the bearish mood is partly linked to a new wave of pandemic blowback in Japan’s big cities.

The end of a 5-week winning streak

 It had to happen eventually and this is as good a week as any.

After more than a month of weekly gains, the red-ink brigade finally caught up with our strategy benchmarks and all four lost ground this week.

The biggest decline: Global Beta 16 (G.B16), which shed 0.6%. Despite the loss for this 16-fund opportunity set (per the funds in the table above), G.B16 continues to hold the lead for year-to-date results, rising 7.3% for the year so far through today’s close. For details on all the strategy rules and risk metrics, see this summary.

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Disclosures: None.

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