ETF Watchlist: Week Of May 29

It was another solid week of gains in the equity markets. Tech stocks once again led the way with the Nasdaq posting a 2.1% gain on the week while the S&P 500 and Dow were up “only” around 1.4%. Year-to-date, that puts the S&P 500 up around 8% with the Nasdaq up a very solid 15%.

Just one week after I talked about the financial markets showing a crack in their armor following further news on the Trump-Russia front, the markets looked impervious once again. On the negative side, we saw new home sales decline 11%. While that number in a vacuum looks troublesome and is worth keeping an eye on in combination with other housing data (pending home sales and construction spending data get released later this week) but the overall trend remains positive with year-to-date sales solidly up over the same period last year.

The investigation into the White House-Russia connections looks like it could be a long, drawn out affair. The markets don’t seem terribly concerned with it as another batch of stories this week drew a very tepid reaction. Absent some sort of bombshell news, it doesn’t look like this will be a significant market mover in the near term.

In other news, just when it looked like volatility might pick up again, the CBOE Volatility Index (VIX) dropped right back down to 2017 lows. What’s the cause of the lack of volatility? Some point to the lack of any real surprises lately. The Fed seems poised to move on schedule. Corporate earnings for the quarter looked solid. I’ve read some arguments that the rapid rise of passive investing strategies is taking some of the trading activity out of the markets. I tend to think it’s the overall lack of market moving news that is the primary cause. Things seem to be chugging right along as expected and that’s not necessarily a bad thing!

The odds of a June rate hike stand at around 83% right now according to the Fed futures market. The chances of a rate hike looked a little more uncertain last week, but now it looks like it would be a surprise if the Fed didn’t raise rates next month.

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