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Top ETF Stories of August

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Overruling the historical trend, the U.S. market has put up a good show so far in the month of August. In fact, a consensus carried out from 1950 to 2017 shows that August has offered positive stock returns in 37 years and negative in 31, per, the average negative return being 0.27%.

But three big U.S. ETFs, SPDR S&P 500 ETF SPYSPDR Dow Jones Industrial Average ETF (DIA - Free Report) and Invesco QQQ Trust QQQ have added about 3.2%, 2.5% and 5% in the past month (as of Aug 30). All-world ETF iShares MSCI ACWI ETF ACWI too has gained more than 0.9% in the past month. The funds started August on a decent note and suffered somewhat in mid-August only to spring back later in the month.

Let’s take a look at the top ETF stories of August.

Marijuana ETF Was on a High

Thanks to Canada’s pending legalization of recreational marijuana from Oct 17, 2018, its cannabis industry was on a tear in the month as renowned beverage companies are paying keen attention in it. So, the ETF targeting the cannabis/marijuana industry, ETFMG Alternative Harvest ETF MJ, has added about 22.6% in past month.

U.S.-based Constellation Brands STZ expanded its stake in the biggest-listed cannabis company Canopy Growth Corporation CGC, while there was news that the U.K.-based liquor maker Diageo Plc will indulge in discussion with at least three Canadian cannabis companies to buy a stake or form a partnership with one of them (read: Pot Stocks Are on a High: Play These Cannabis ETFs).

Plus, earlier this month, the Canadian arm of Molson Coors Brewing Co. and Quebec-based pot producer Hydropothecary Corp. announced their plan to make non-alcoholic, cannabis-infused beverages, as beer sales have slowed down in North America.


Emerging Markets Wobble on Turkey-Argentina Issue

Economic trouble in Turkey and Argentina hit their currencies hard in the month. To add to the woes, Turkey had a diplomatic tussle with the United States. The slide in both markets sent shock waves in the broader emerging markets. iShares MSCI Turkey ETF TUR has lost 29.4% in the past month, while Global X MSCI Argentina ETF ARGT has retreated about 15.7% and iShares MSCI Emerging Markets ETF EEM is off 4.3%.

Abating Trade Tensions

On Aug 27, the United States and Mexico agreed on a new bilateral trade deal which will likely rewrite North American Free Trade Agreement or NAFTA. There was no new obstacle in U.S.-Sino trade relations throughout the month though there was news at the end that President Donald Trump is planning to slap tariff on an extra $200 billion worth of Chinese goods and to remove the United States from the World Trade Organization.

The imminent beneficiaries of the U.S.-Mexico deal were the likes of First Trust NASDAQ Global Auto ETF CARZ and iShares MSCI Mexico Capped ETF EWW (read: U.S.-Mexico Trade Deal to Revamp NAFTA: ETF Winners).

Investors should also note that EWW currently has a Zacks Rank #4 (Sell). ETF ranks are based on a long-term view. Performance can vary in a short-term period.

U.S. Market at Record High with Small-Caps in Prominence

The S&P 500 and the Nasdaq Composite hit 2,900 and 8,000 mark for the first time in late August on easing trade tensions and solid corporate earnings (read: 4 ETF Picks as Nasdaq Hits 8,000).

A key finding was the revival of the small-cap segment in August with iShares Russell 2000 ETF IWM adding about 4.3% past month. Small-cap stocks are likely to do better in a rising rate environment (which currently the case is) since these are tied more to domestic activities and are thus not hurt by a rising dollar. Economic wellbeing in the domestic land is also a major positive for small-cap stocks. Janus Henderson Small Cap Growth Alpha ETF JSML is up more than 12% past month (read: Small-Caps Rule in August: Top-Performing ETFs).

Surge in Tech ETFs

The technology corner of the broad U.S. stock market has been an area to watch lately. Upbeat earnings releases, the tax reform, strength in FAANGs and growing demand for emerging technologies have boosted the sector. About 77.8% companies of the sector delivered a solid blended beat ratio of 79.6%. Invesco DWA Technology Momentum ETF PTF added about 9% in the past month (as of Aug 30, 2018) (read: Play 4 Sector ETFs With Strong Beat Ratios).

SEC Rejections for Bitcoin ETFs Continue

The month was pretty important for bitcoin as the SEC deferred decision for VanEck-SolidX’s proposed product in early August and rejected nine other proposals from three different issuers on Aug 22.  In late July, the authority forbade an application by the Winklevoss brothers to come up with a bitcoin ETF, finding the product not safe enough for investors. Thanks to stringencies by regulatory authorities, bitcoin price has dropped about 8.2% past month (as of Aug 30, 2018).

However, per an article published on Reuters, the SEC released letters mentioning its intention to reassess the verdict of declining nine applications for various Bitcoin ETFs, soon after rejecting. However, the letters do not clarify the timeline for the decision (read: SEC to Rethink Rejecting Bitcoin ETFs: Any Hopes Ahead?).

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