ETFdb.com analyzes the search patterns of our visitors each week. By sharing these trends with our readers, we hope to provide insights into what the financial world is concerned about and how to position your portfolio.
Abstract volatility ETFs have taken the first place in our top this week in a tepid environment for many asset classes despite the Federal Reserve and the European Central Bank announcing their monetary policy decisions. In the absence of a rate hike from the Fed, investors have turned to riskier emerging markets equities and Brazil, which is also trending because it’s hosting the upcoming Olympic Games. Lastly, technology stocks have emerged largely unscathed from a series of headwinds; Nasdaq 100 and technology ETFs are both present in our list.
Volatility ETFs: Preparing for the Worst
It is hard to ponder why volatility ETFs have enjoyed interest from our readers considering the U.S. markets are at all-time highs, and the performance of these volatility instruments has been catastrophic in many cases. However, it is likely that investors expect a dramatic reversal in the equity markets, in which event volatility ETFs will experience skyrocketing demand. Volatility ETFs have seen 34% more viewers this week compared with last month, as many of them continued their sluggish performance this week, crushed by equity markets’ stability at high prices. For example, VIX Short-Term Futures (VIXY ) has dropped 6.20% over the past five days, extending year-to-date losses to a staggering 46.45%.
Equity markets may be bound for a correction, particularly because they are at all-time highs in an environment filled with risks from geopolitical uncertainty to sluggish economic growth. Investors are probably sensing that and may be in search of protection from an eventual stock market decline. Volatility ETFs are the right instruments for hedging against a stock market contraction.
The reason for this apparent discrepancy between prices and fundamentals is the world’s central banks’ vigorous message to defend their economies from a series of risks, including Britain’s exit from the European Union. The Bank of England and the European Central Bank have not announced any stimulus measures at their most recent meetings, but they strongly hinted that further easing is on the way if there is a deterioration in the financial markets.
Brazil: Awaiting Olympics
Investors, like all Brazilians, are leaving Brazil’s political woes aside to focus on the upcoming Olympic Games. While ordinary Brazilians will closely watch the sporting event, investors will probably assess how the games will influence the country’s economy and stock markets. Brazil is second in our list this week with a 31% increase in viewership as Rio de Janeiro Olympics start in about a week. Equity markets have not been very upbeat lately about the Olympics, with iShares MSCI Brazil Capped (EWZ ) falling 0.49% since last Thursday. Year-to-date, the ETF remains up an impressive 57.59%.
The country’s equity markets have skyrocketed after a swathe of commodities recovered from record lows. The Olympics has also weighed positively on the stock markets. However, the road ahead should be bumpier considering the political uncertainty at home and commodity prices staging a reversal. Indeed, oil prices have continued their downward slide this week as crude stockpiles increased in the week through July 22 by 1.7 million barrels to 521 million.
Technology Equities: Unicorns Among Horses
Technology stocks have seen their traffic grow about 28% this week, as many ETFs tracking the performance of these companies have benefited from upbeat earnings results. Lately, technology equities have outperformed broad market indexes such as the S&P 500 and Dow Jones. For instance, Technology Select Sector SPDR Fund (XLK ) has risen 1.51% since last Thursday and 8% since the beginning of the year, while the S&P 500 has fallen 0.21% and jumped 6% over the same periods, respectively.
Investors have cheered the continuing growth of many technology companies, boosted by a secular drive toward their products and the central banks. Many companies have yet to release their financial results for the last quarter, but some iconic firms have already done so. Apple (AAPL), for example, rose as much as 6.50% on Wednesday despite reporting a slowdown in sales. Evidently, investors had expected a more dramatic fall in revenues. Facebook (FB), another tech darling, impressed analysts with earnings of 97 cents per share versus 82 cents estimated, at a time when the company drew the attention of some short-sellers claiming it is overvalued. Shares were up nearly 5% following the earnings beat in extended trading.
Emerging Markets Equities: Yield Me Something
Emerging markets equities have taken the fourth place in our weekly top five with a 28% increase in traffic. Many of the ETFs tracking these equities have had a bumper year, with investors piling in after it became clear the Federal Reserve will adopt a slow pace for raising interest rates. Vanguard FTSE Emerging Markets (VWO ), an ETF heavily exposed to China, India, and Brazil, has been flat over the past five days but has risen 12.69% since the beginning of the year.
The Federal Reserve provided an upbeat assessment of the U.S. jobs market and economic growth on Wednesday, but stopped short of predicting an imminent rate hike at its September meeting. A lift in December remains a live possibility, however, but investors preferred to focus on the slow pace of rate increases, bidding the dollar down and boosting emerging markets. In addition, central banks across the developed world are expected to provide new stimulus measures, with the Bank of Japan first in line this Friday. Depressing yields in the developed world boost the appetite for riskier assets such as emerging markets.
Nasdaq 100 Index
Nasdaq 100 is trending for similar reasons technology equities garnered interest. The index has drawn about 24% more viewers in the past week compared with the same period a week ago. The index, represented by PowerShares QQQ (QQQ ), has jumped 1.33% over the past five days, comfortably beating the S&P 500 by more than one percentage point. Year-to-date, the Apple-heavy index is up 2.43%.
After Facebook and Apple released their earnings reports for the latest quarter, investors will closely watch how Amazon (AMZN) and Google-parent Alphabet (GOOGL) fared over the past three months. Both companies will issue their results on Friday.
The Bottom Line
This week, volatility ETFs have trended upward as investors started to prepare for an eventual market correction from record highs. At the same time, Brazil has attracted readers as it prepares to host the upcoming Olympic Games, while emerging markets were boosted by the Federal Reserve’s inaction. Lastly, technology stocks have performed better than the broad market on upbeat earnings reports.
By analyzing how you, our valued readers, search our property each week, we hope to uncover important trends that will help you understand how the market is behaving so you can fine-tune your investment strategy. At the end of the week, we’ll share these trends, giving you better insight into the relevant market events that will allow you to make more valuable decisions for your portfolio.