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Last quarter was great for global equities. Wall Street indices saw record highs in the quarter, with big three ETFs, SPDR S&P 500 ETF (SPY - Free Report) , SPDR Dow Jones Industrial Average ETF (DIA - Free Report) and PowerShares QQQ ETF (QQQ - Free Report) , returning about 4.4%, 5.6% and 5.9%, respectively (as of Sep 29, 2017).

Foreign ETFs remained equally sturdy with the all-world ETF iShares MSCI ACWI ETF ACWI) gaining about 5%, iShares Asia 50 ETF AIA jumping about 7.4%, Vanguard FTSE Europe ETF VGK adding about 6.25 and iShares MSCI Emerging Markets ETF (EEM - Free Report) returning about 8.3% in the last three months (as of Sep 29).

Let’s delve a little deeper and find what’s behind the rosy picture.

Hawkish Fed Meeting

Though there was no rate hike in the third quarter, the Fed turned super-hawkish in its September meeting. The central bank surprised the investment world by announcing that it will start winding down its mammoth $4.5-trillion balance sheet of Treasury securities and mortgage-backed assets from October (read: Best ETF Strategies for a Hawkish Fed).

Such hawkish hints pushed up bond yields and favored the financial stocks at the end of the quarter, though the early phase of Q3 wasn’t that favorable for these stocks. Financial Select Sector SPDR ETF (XLF - Free Report) and SPDR S&P Bank ETF (KBE - Free Report) added about 5.3% and 4% in the last three months (as of Sep 29, 2017).

North Korea Tension Spikes

Tensions between North Korea and U.S. President Trump, and their exchanges of incendiary rhetoric flared up in the quarter. This was one of the key reasons that supported gold. Safe-haven ETF SPDR Gold Shares (GLD - Free Report) gained 3% in the quarter. Moreover, all shocking and unwanted activities kept the broader market edgy and boosted quality ETFs likeiShares Edge MSCI USA Quality Factor ETF QUAL, which was up about 4.8% in the last three months (as of Sep 29).

Bitcoin’s Monster Gains

The rising tide for cryptocurrencies like bitcoin, Ethereum and Ripple shook the investing world in the third quarter. The rising tide for cryptocurrencies like bitcoin, Ethereum and Ripple stirred up the investing world. In last three months, the price of the digital currency has surged about 70% (as of Oct 1, 2017) (read: Bitcoin ETFs: More Issuers Join the Race).

Energy and Tech Rally

The possibilities of OPEC discussing the extension of the output cut deal and International Energy Agency’s (IEA) upgrade of the global oil demand estimate and OPEC output decline in August for the first time in five months led to oil price jump. WTI crude ETF USO and BNO were up 9.8% and 16.6% in the last three months (as of Sep 29, 2017). United States Diesel-Heating Oil UHN was up about 21% in the quarter.

The technology sector has been positioned strongly thanks to improving economic and industry fundamentals and Trump’s proposed corporate tax reform. Plus, since mining of cryptocurrencies needs the usage of semiconductors, semiconductor ETFs too performed extravagantly in the quarter. Technology Select Sector SPDR ETF (XLK - Free Report) and VanEck Vectors Semiconductor ETF (SMH - Free Report) jumped about 8.4% and 14% in the third quarter, respectively (read: 5 Sector ETFs for Revenue Growth Play).

Two Hurricanes Hit America

Two back-to-back hurricanes ravaged America in the third quarter. While hurricane Harvey flooded Houston, hurricane Irma hit Florida. As Houston is the core of the U.S. oil and gas industry, the Harvey impact was deeply felt in the energy markets with several refinery shutdowns.  United States Gasoline (UGA - Free Report) (UGA - Free Report) was up about 16% in the last three months (as of Sep 29, 2017). Construction stocks got a lift on higher remodeling demand. PowerShares Dynamic Building & Construction ETF (PKB - Free Report) (PKB - Free Report) was up about 5% in the quarter (read: ETFs to Watch in Harvey Aftermath & New Hurricane Irma).

Among the losers on increased flight cancellations were U.S. Global Jets ETF JETS, which declined about 6%. Insurance stocks fell on the ground, but recouped soon on rising rate prospects. Overall, PowerShares KBW Property & Casualty Insurance Fund KBWP was up only 0.2% in Q3 (as of Sep 29).

Eurozone: Merkel’s Win & Euro’s Story

The Eurozone saw a tussle between a rebounding economy and apparently ebbing political power of German chancellor Merkel. Angela Merkel’s conservative CDU/CSU bloc witnessed “its lowest support in almost 70 years” in late September.

While this is a concerning fact for euro, heightened speculation over the European Central Bank’s (ECB) possible announcement of the QE wind down as soon as in October favored the currency in the early phase of the quarter (read: How to Ride 33-Month High Euro With ETFs).

CurrencyShares Euro ETF (FXE - Free Report) was up about 3.3% in the last three months (as of Sep 29). Overall, Eurozone ETF SPDR EURO STOXX 50 ETF FEZ added about 7.6% in the same time frame (read: 6 Europe ETFs Are Top Picks).

Brazil: A Winner

Overall, emerging markets rocked the quarter with EEM returning about 8.3%, almost double SPY’s 4.4% gain. Among the lot, Brazil sizzled with double-digit returns.           

The economy returned to growth in the first quarter, after two-years of recession. Then it grew 0.2% sequentially in the second quarter, following 1% advancement in the previous period and beating market expectations of 0.1% expansion. All these offered the much-needed boost to Brazilian ETFs like iShares MSCI Brazil Small-Cap ETF EWZS, which was up about 32% in the last three months (as of Sep 29) (read: Brazil Economy on a Roll: ETFs to Cash In On).

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