The first month of 2018 was upbeat for the broader market with SPDR S&P 500 ETF (SPY - Free Report) , SPDR Dow Jones Industrial Average ETF (DIA - Free Report) and PowerShares QQQ ETF (QQQ - Free Report) adding about 4.8%, 5.1% and 6.4% as of Jan 30, 2018. There were several developments in the investing backdrop and asset classes.
Here, we would like to note key ETF events in the month of January.
Spike in Bond Yields
The bond market started the year with higher yields.The yield on the 10-year Treasury notes rose 27 bps in the month (as of Jan 30, 2018). The yield on the benchmark two-year Treasury note hit close to its highest level since September 2008. iShares 1-3 Year Treasury Bond ETF (SHY - Free Report) lost about 0.3% while iShares 20+ Year Treasury Bond ETF (TLT - Free Report) shed about 2.8% as of the same date (read: Prepare for Bond Bear Market With These ETFs).
Earnings Season Unfolds
The Q4 earnings season is off to a strong start, with earnings from 133 S&P 500 companies that have reported results up 12.3% from the same period last year on 8.8% higher revenues. The beat ratio is also worth mentioning with 81.2% surpassing EPS estimates and 78.9% topping revenue estimates. Overall, total earnings and revenues are projected to grow 11.6% and 5.9%, respectively. This put WisdomTree U.S. Earnings 500 Fund (EPS - Free Report) in focus (read: 4 ETFs Set to Surge in Q4 Earnings).
No Bitcoin ETF, But Blockchain Makes Inroads
Hopes were high about a probable bitcoin ETF launch this year. But responding to two investment associations on Jan 18, a public letter writtenby Dalia Blass, director at SEC's Division of Investment Management, revealed that there are "significant investor protection issues that need to be examined before sponsors begin offering these funds to retail investors." According to Blass, the agency is skeptical about valuation, liquidity, custody, arbitrage and potential manipulation.
On the other hand, blockchain ETFs were launched last month. Reality Shares Nasdaq NexGen Economy ETF BLCN, Amplify Transformational Data Sharing ETF (BLOK - Free Report) and First Trust Indxx Innovative Transaction & Process ETF LEGR are the new launches (read: Forget Bitcoin, Bet on Blockchain With These New ETFs).
IPO's Decade-High Start to 2018
The U.S. IPO market was off to a great start in 2018. We have probably seen the busiest January for deals in four years, as per Renaissance Capital and as quoted on MarketWatch. The recent rise in IPO activity can be credited to a surging stock market, improving economic fundamentals and increasing consumer sentiment that have led to the appeal for new stocks with high growth potential.
In such an upbeat environment, one should keep a tab on IPO ETFs like First Trust US Equity Opportunities ETF (FPX - Free Report) and Renaissance IPO ETF (IPO - Free Report) (read: Play IPO's Decade-High Start to 2018 With These ETFs).
From his campaign days, Trump has indicated that he wants to renegotiate the North American Free Trade Agreement (NAFTA) or totally remove it. The agreement had tied up the United States, Canada and Mexico for more than two decades. Rumors are rife that President Donald Trump will announce that the United States will walk out of NAFTA during his State of the Union address, as per the source (read: ETFs to Watch if U.S. Pulls Out of NAFTA).
While NAFTA makes up just a fraction of the U.S. economy, it specifically represents substantial portions of Mexico and Canada’s GDP. A huge portion of U.S. trade deficit with Mexico is from the auto sector. Thus, country ETFs like iShares MSCI Mexico Capped (EWW - Free Report) and iShares MSCI Canada ETF (EWC - Free Report) and auto ETF First Trust NASDAQ Global Auto ETF (CARZ - Free Report) were in focus in the month.
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