The month of July was all about trade, tech and corporate earnings. Trade war tensions seem to have peaked between the United States and China. U.S. tech stocks had a spectacular journey before falling after Jul 25 on acute pain in the social media and semiconductor space (read: Semiconductor ETFs to Tap Intel's Dip Post Q2 Earnings).
Overall, the month of July was decent for Wall Street. Overall, the top three ETFs, SPY, DIA and QQQ added about 3%, 4.2% and 1.3%, respectively, in the past month (as of Jul 30, 2018).
Below we highlight a few ETF events that pulled the strings of market movement in July.
China Tariff Enacted
The United States and China first targeted $50 billion worth of goods for import tariffs, out of which tariffs of $34 billion of goods were enacted on Jul 6. Then the Trump administration disclosed another list of tariffs on $200 billion worth of Chinese goods. And in late July, President Trump intends to enact tariffs on all $505 billion of Chinese goods imported into the United States – the dollar value of U.S. imports from China in 2017.
The world has started speculating that China might be considering a deliberate devaluation in yuan. The People’s Bank of China weakened the yuan-greenback reference rate the most in two years. WisdomTree Chinese Yuan Strategy ETF (CYB - Free Report) lost about 1.6% past month (as of Jul 30, 2018) (read: China's Likely Retaliation to US Tariffs & Its Impact on ETFs).
US-EU Trade Relations Better Off
In late July, the United States and European Union agreed to reconcile on trade and lower trade barriers. The duo would now work toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto goods, if we go by an article published on BBC.
Per the source, both parties also agreed to increasing trade in services and agriculture, including liquefied natural gas and U.S. soy bean exports to the EU. Vanguard FTSE Europe ETF (VGK - Free Report) gained about 4% in the past month (read: Tariffs Likely to Dent US Earnings: ETFs in Focus).
Steep Social Media Selloff & Tech Seesaw
Investors dumped social media stocks and ETFs afterFacebook Inc. (FB - Free Report) and Twitter Inc. (TWTR - Free Report) came up with a poor earnings show. Facebook missed the Zacks Consensus Estimate for the first time in nine quarters for earnings and in 13 quarters for revenues.
And what punished Twitter shares badly was an unexpected decline in monthly average users (MAU) and weak guidance amid overvaluation concerns. Global X Social Media ETF (SOCL - Free Report) lost about 7.5% in the month (read: Social Media Dives: Time to Buy the Dip With ETFs?).
Large-Caps Outshine Small Caps
A 4.1% uptick in U.S. GDP growth in Q2, upbeat corporate earnings and receding fear in the nagging five-month long trade talks took large-cap growth ETFs to a 52-week high in July. Plus cheaper valuation worked well for large caps as these have been subdued this year on trade concerns. Russell 1000 Growth Vanguard (VONG - Free Report) gained 1.6% in July while iShares Russell 2000 ETF (IWM - Free Report) lost about 0.4% (read: Trade Fear Oversold? Large-Cap Growth ETFs at 52-Week High).
SEC Disapproves Winklevoss Bitcoin ETF: What Next?
In late July, the Securities and Exchange Commission has forbidden an application by the Winklevoss brothers to come up with a bitcoin ETF, finding the product not safe enough for investors. This is the second time the SEC is rejecting a bitcoin ETF proposed by Cameron and Tyler Winklevoss (read: SEC Disapproves Winklevoss Bitcoin ETF: What Next?).
Bitcoin prices gathered steam in July on rumors that the SEC could give a nod to a bitcoin ETF as early as August. Among the latest expectants, Bitwise Asset Management filed (this July) for an index fund that intends to follow the performance of a basket of the 10 largest cryptocurrencies. Prices hit a high of $8,397.63 on Jul 24, rising about 27.8%. However, the SEC’s denial news took a beating on the commodity.
BoJ to Take a More Flexible Stance
Bank of Japan (BoJ) was deemed to be looking for ways to tweak its yield curve control policy and stock-buying techniques. And the news pushed up the Japanese benchmark 10-year yield to about a six-month high, sweeping U.S. and European bond yields upward as well in late July.
However, on Jul 31, BOJ kept its rates unchanged but maintained that it would make its policy framework more flexible for the long-term yield target. The BOJ also noted that the economy would take "more time than expected" to attain the inflation target. Following the meeting, yen dropped and the Nikkei went green, per CNBC. Investors can target WisdomTree Japan Hedged Equity ETF (DXJ - Free Report) after this announcement.
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