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Having emerged from a Brexit-begotten June and pushing aside the sell-off induced by that event, the global markets hit a purple patch to start July. The key U.S. gauges, the S&P 500 and the Dow Jones Industrial Average, hit several highs.
Let’s delve a little deeper into the top ETF stories of July and see what drove the markets higher in the month and how it may behave ahead if the present scenario remains intact:
U.S. Markets Hitting Highs
Along with some solid U.S. economic readings, signs of slowly abating earnings recession, relatively better banking earnings despite low levels of yields and the yet-not-seen meaningful effects of the Brexit contagion favored risk-on sentiments.
Plus, hints of a more accommodative monetary policy from foreign economies and compelling valuation following a steep sell-off led investors to bet on key U.S. equity indices. Not only the U.S. market, the surge in investor optimism also left a knock-on impact on the other markets.
As expected, the Fed stayed put in its July meeting and kept the short-term interest rates steady in the 0.25–0.50% band. However, the Fed changed its assessment on the health of the U.S. economy. Contrary to the June meeting, this time, the Fed was far more confident about the economy.
Though the June job data and a rising household spending helped the Fed tofirm up its tone about the U.S. economy, lack of inflation and muted business investment compelled its dovish stance (read: A Positive-But-Cautious Fed Meet: Buy These ETFs).
Abe’s Win Puts Japan ETFs on Radar
After the sweeping victory of prime minister Shinzo Abe in the Upper House election mid-July, Japanese shares regained their lost ground and have already logged their “biggest gain in almost five months (read: Why Japan ETFs Are on an Incredible Run).”
This was because Abe’s win was synonymous to the launch of a gitgantic stimulus package. Already, he has planned a huge economic stimulus amounting to 28 trillion yen or $265 billion. This measure even breezed past initial estimates of around 20 trillion yen. It will comprise 13 trillion yen in "fiscal measures.”
On the other hand, in its July meeting, Bank of Japan rolled out a petite measure of stimulus by raising the annual purchase limit of exchange-traded stock funds from ¥3.3 trillion to ¥6 trillion. Since he did not cut interest rates any further, WisdomTree Japan Hedged Financials Fund (DXJFadded about 11.3% in the last one month (as of July 29, 2016).
Overall, a steadfast Abe and a modest BoJ ushered gains on Japan ETFs in the month with small-cap DFJ and large-cap (EWJ - Free Report) adding about 5.9% and 4%, respectively.
Technology Sector on Tear
In the final stretch of the month, Nasdaq turned out to be a winner from impressive tech earnings from the likes of Apple (AAPL - Free Report) and Facebook . But within the broader tech space, semiconductor, the value-centric traditional tech area, is taking an upper hand against a still-edgy investing backdrop (read: Why Semiconductor ETFs Are Hitting Highs).
Olympic Boosting Brazil ETFs
After a long time, things are falling in places for Brazil ETFs. First, impeachment trials against the former president Dilma Rousseff, and then, Olympics 2016 from August 5 to August 21 are driving small-cap and consumer-oriented Brazil ETFs. This is because such events normally boost the economy of the concerned country and small-caps are mostly tied to the domestic economy (read: Is Summer Olympic 2016 a Boon to Brazil ETFs?).
G-X Brazil Consumer ETFBRAQ and iShares MSCI Brazil Small-Cap ETF (EWZS - Free Report) are some of outperforming ETFs in this segment.
Silver Outshining Gold
Despite such market altitude, metal prices held steady in July. Since the greenback remained muted and safe-haven demand remained still in vogue, demand for gold and silver was strong. Moreover, silver has high usage in industrial activities with about 50% of total demand coming from industrial applications (read: Silver or Gold ETFs: Which is The Best Bet for July?).
With China, the biggest industrial fabricator after the U.S., seeing the manufacturing sector growing in July for the first time since February 2015 (as per a private survey) and the U.S. industrial sector being steady, silver had every reason to outdo gold in the month. Silver bullion ETF (SLV - Free Report) was up 11.4% in the last one month while gold bullion ETF (GLD - Free Report) added 2.5%.
Low-Volatility Still in Play
Markets may be at highs, but the ascent was not risk-free. In fact, investors seem to have little faith in the recent rally as they are also following low-volatility ETFs with great enthusiasm. SPDR Russell 1000 Low Volatility Focus ETF ONEVand SPDR Russell 2000 Low Volatility ETF (SMLV - Free Report) are some of the ETFs that gained from this trend. ONEV and SMLV added about 5.6% and 5% in the last one month (as of July 29, 2016).
In fact, with U.S. GDP data for the second quarter coming at 1.2% versus 2.6% expected, shaky investor sentiments will likely be there in place in the coming month, no matter how high the bulls jump.
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Top ETF Stories of July
Having emerged from a Brexit-begotten June and pushing aside the sell-off induced by that event, the global markets hit a purple patch to start July. The key U.S. gauges, the S&P 500 and the Dow Jones Industrial Average, hit several highs.
Let’s delve a little deeper into the top ETF stories of July and see what drove the markets higher in the month and how it may behave ahead if the present scenario remains intact:
U.S. Markets Hitting Highs
Along with some solid U.S. economic readings, signs of slowly abating earnings recession, relatively better banking earnings despite low levels of yields and the yet-not-seen meaningful effects of the Brexit contagion favored risk-on sentiments.
Plus, hints of a more accommodative monetary policy from foreign economies and compelling valuation following a steep sell-off led investors to bet on key U.S. equity indices. Not only the U.S. market, the surge in investor optimism also left a knock-on impact on the other markets.
Among the top ETFs, the S&P 500-based (SPY - Free Report) added 5.1%, Dow Jones-based (DIA - Free Report) gained 4.3%, Nasdaq-100 (QQQ - Free Report) surged 8.4%, Europe ETF (VGK - Free Report) added 5.8% and the all-world ETF (ACWI - Free Report) returned about 5.2% in the last one month (as of July 29, 2016) (read: Play Global Market Rally with These ETFs).
A Positive-But-Cautious Fed Meet
As expected, the Fed stayed put in its July meeting and kept the short-term interest rates steady in the 0.25–0.50% band. However, the Fed changed its assessment on the health of the U.S. economy. Contrary to the June meeting, this time, the Fed was far more confident about the economy.
Though the June job data and a rising household spending helped the Fed tofirm up its tone about the U.S. economy, lack of inflation and muted business investment compelled its dovish stance (read: A Positive-But-Cautious Fed Meet: Buy These ETFs).
Abe’s Win Puts Japan ETFs on Radar
After the sweeping victory of prime minister Shinzo Abe in the Upper House election mid-July, Japanese shares regained their lost ground and have already logged their “biggest gain in almost five months (read: Why Japan ETFs Are on an Incredible Run).”
This was because Abe’s win was synonymous to the launch of a gitgantic stimulus package. Already, he has planned a huge economic stimulus amounting to 28 trillion yen or $265 billion. This measure even breezed past initial estimates of around 20 trillion yen. It will comprise 13 trillion yen in "fiscal measures.”
On the other hand, in its July meeting, Bank of Japan rolled out a petite measure of stimulus by raising the annual purchase limit of exchange-traded stock funds from ¥3.3 trillion to ¥6 trillion. Since he did not cut interest rates any further, WisdomTree Japan Hedged Financials Fund (DXJF added about 11.3% in the last one month (as of July 29, 2016).
Overall, a steadfast Abe and a modest BoJ ushered gains on Japan ETFs in the month with small-cap DFJ and large-cap (EWJ - Free Report) adding about 5.9% and 4%, respectively.
Technology Sector on Tear
In the final stretch of the month, Nasdaq turned out to be a winner from impressive tech earnings from the likes of Apple (AAPL - Free Report) and Facebook . But within the broader tech space, semiconductor, the value-centric traditional tech area, is taking an upper hand against a still-edgy investing backdrop (read: Why Semiconductor ETFs Are Hitting Highs).
Olympic Boosting Brazil ETFs
After a long time, things are falling in places for Brazil ETFs. First, impeachment trials against the former president Dilma Rousseff, and then, Olympics 2016 from August 5 to August 21 are driving small-cap and consumer-oriented Brazil ETFs. This is because such events normally boost the economy of the concerned country and small-caps are mostly tied to the domestic economy (read: Is Summer Olympic 2016 a Boon to Brazil ETFs?).
G-X Brazil Consumer ETFBRAQ and iShares MSCI Brazil Small-Cap ETF (EWZS - Free Report) are some of outperforming ETFs in this segment.
Silver Outshining Gold
Despite such market altitude, metal prices held steady in July. Since the greenback remained muted and safe-haven demand remained still in vogue, demand for gold and silver was strong. Moreover, silver has high usage in industrial activities with about 50% of total demand coming from industrial applications (read: Silver or Gold ETFs: Which is The Best Bet for July?).
With China, the biggest industrial fabricator after the U.S., seeing the manufacturing sector growing in July for the first time since February 2015 (as per a private survey) and the U.S. industrial sector being steady, silver had every reason to outdo gold in the month. Silver bullion ETF (SLV - Free Report) was up 11.4% in the last one month while gold bullion ETF (GLD - Free Report) added 2.5%.
Low-Volatility Still in Play
Markets may be at highs, but the ascent was not risk-free. In fact, investors seem to have little faith in the recent rally as they are also following low-volatility ETFs with great enthusiasm. SPDR Russell 1000 Low Volatility Focus ETF ONEV and SPDR Russell 2000 Low Volatility ETF (SMLV - Free Report) are some of the ETFs that gained from this trend. ONEV and SMLV added about 5.6% and 5% in the last one month (as of July 29, 2016).
In fact, with U.S. GDP data for the second quarter coming at 1.2% versus 2.6% expected, shaky investor sentiments will likely be there in place in the coming month, no matter how high the bulls jump.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>