ETF Quickview 4-28-2017

In News by Michelle

Money Market ranks 43 for the week ending 4-28-2017 with US Equities, Europe and Developed Markets leading the pack.

Last week the S&P 500 broke out of its range-bound consolidation pattern to the upside, approaching its previous high from early March. This move from neutral can be attributed to 5 mega-Tech giants (FAAAM) that are lifting the entire index; Facebook (FA), Apple (AAPL), Amazon (AMZN), Alphabet (GOOGL) and Microsoft (MSFT). This narrow leadership confirmed by the Industry Health model within the Index, highlights that there is underlying risk in this market. However, investors seem to be throwing caution to the wind and buying the broader index hand-over-fist. The S&P 500 Alpha-Enhanced is buying at the end of today. It finally found an entry point due to the breakout.

The NASDAQ has achieved its fastest +1,000 point jump since the dotcom era in 49 trading days. Our U.S. Equity Alpha-Enhanced model has traded the NASDAQ 100 beautifully, up +15.39% YTD. It’s going to cash at the end of today to take some profits from a nice run-up.

As seen by the ETF Quickview, the broad index ETFs are leading and passive investing is gaining momentum. Our GTAC & NDR models have picked up the U.S. Equity leadership nicely and have been diversified in developed markets. The ETF “EFA,” the proxy for the developed international equity markets, gained 3% last week as the ECB signaled no urgency to tighten monetary policies, reigniting the reflation trade and implications for the French election this coming Sunday will most likely go to Macron (supporter of European Union and the Euro).

Bonds have been fairly muted and investors seem to be willing to go out the risk spectrum buying high yields which have been leading the pack.

Last week the Trump administration announced its tax proposal in a bid to begin the legislative process. It did include all of the big promises made to include:

  • Lowering the corporate tax rate from 35% to 15% and immediately expensing capital investment rather than drag out the depreciation over 10 years.
  • Collapsing the number of individual tax brackets from seven to three (10% – 25% – 35%) and raising the standard deduction for a married couple to over $24,000 thus simplifying the tax filing process down to one page. The mortgage and charitable deductions would remain intact.
  • Offer a one-time discount on the repatriation tax to incent companies to bring back trillions in profits parked off-shore to stimulate reinvestment back into the USA.

Of course, this is the start of what will be a legislative process to get support. One thing learned from the first attempt to repeal Obamacare was to make sure you have the votes before you vote and that requires compromise.