Latin America ETF Leads Global Action

Action is strongest in the global categories, and volatility in the Latin America ETF is now a positive contributor. Sector and factor movements are subdued, while the leadership provided by Financials and High Beta remains intact.

Sectors: The sector leadership rankings are starting to sound like a broken record, just repeating “Financials are on top” over and over again. Indeed, the Vanguard Financials ETF (VFH) has registered the highest momentum reading among our sector benchmark ETFs for 11 consecutive weeks. Additionally, it has ranked no lower than third for 15 weeks. Telecom ascended to the second-place slot three weeks ago and sits there again today. Materials, Technology, and Industrials are in a tight battle for third, with Consumer Discretionary close behind. Utilities posted the largest momentum increase, allowing it to move a notch higher. Health Care weakened and slipped to 10th, while Consumer Staples remains on the bottom.

Factors: All but two of the factor benchmark ETFs posted momentum declines this week. Low Volatility and Momentum were the two exceptions, as both squeezed out a one-point improvement and climbed a notch in the rankings. Although Yield turned in a relatively flat performance for the week, it managed to fall three places to land on the bottom. This appears to be a contradiction to the improvement mentioned above for Utilities, which happens to be the highest-yielding sector category. The top five ranked factors of High Beta, Small Size, Value, Fundamental, and Market Cap have been unchanged for five weeks.

Global: Compared to the subdued movements among the sectors and factors, the global categories seem to be the home of recent market action. That becomes more obvious when you realize that only one global category lost momentum over the past week, and that category happens to be the United States. The iShares Latin America 40 ETF (ILF ), our Latin America benchmark, has been quite volatile. Sitting at the top 11 weeks ago, it fell to last place during the first five weeks of the post-election period. Over the past four weeks, Latin America has climbed from the bottom to second place, and it is now challenging Canada for the top spot. EAFE and Emerging Markets were the only other categories with relative-strength improvements. The U.S. has dropped from first to sixth the past two weeks. Others posting a decline in relative strength include the Eurozone, World Equity, and Japan.

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Disclosure: Author has no positions in any of the securities, companies, or ...

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