To help investors keep up with the markets, we present our ETF Scorecard. The Scorecard takes a step back and looks at how various asset classes across the globe are performing. The weekly performance is from last Friday’s open to this week’s Thursday close.
- This week was relatively soft in economic developments, with the European Central Bank’s decision on monetary policy taking center stage.
- The ECB decided to keep monetary policy unchanged, promising to maintain its asset purchase program at least until the end of September. ECB President Mario Draghi admitted that the economy lost some momentum but his confidence in the economic recovery remains unchanged. As a result, Draghi may push back providing an update on forward guidance by at least one month to July. The ECB noted that despite a recent rise in oil prices, inflation remains subdued, making the case for keeping the unprecedented stimulus measures unchanged.
- U.S. 10-year Treasuries have crossed the psychological 3% level for the first time in four years before dropping to 2.96% at Thursday’s close. Investors are confident that the U.S. Federal Reserve will continue to raise rates as the economy fires on all cylinders and inflation moves up. At the same time, the yield curve is flattening, with the spread between the 2-year Treasuries and 10-year bonds hovering at 10-year lows. At some point during the week, the spread was 41 basis points, but closed at 54 on Thursday. Typically, a flattening yield curve is a sign the U.S. economy is reaching its potential and a recession may be around the corner. During each of the past recessions, the yield curve inverted, meaning that yields of 2-year Treasuries were higher than 10-year bonds as inflation accelerated and the Fed raised rates rapidly to contain runaway prices.
- Existing home sales in the U.S. rose by 1.1% in March to 5.6 million units. Year-over-year, existing home sales fell by 1.2%, but demand for homes has been higher than supply.
- Germany’s Ifo business climate index deteriorated in April to 102.1 from 103.3, marking the third straight month of declines. Starting in April, Ifo rebased the index to include the services, resulting in the index falling from 114.7 to 103.3.
- U.S. consumer confidence surged by one point to 128.7, beating consensus estimates of 126.1. U.S. consumers are feeling confident given the boost from the tax cut.
- Crude oil inventories resumed their upward trend in the week ended April 20, increasing by 2.2 million barrels. In the prior week, oil stocks dropped by 1.1 million barrels.
- U.S. unemployment claims came in at record-low levels of 209,000 for the week ended April 21, as the outlook for the U.S. economy is getting brighter. Analysts had expected a drop to 230,000 from 232,000 in the prior week.
- Durable goods orders continued to rise in March, by 2.6%, beating expectations of 1.6%. In the prior month, orders increased by 3.1%. Excluding volatile transportation goods, orders stood still comparable to the previous month, disappointing analysts’ forecasts of 0.5% growth.
Risk Appetite Review
- Markets have largely dropped this week as investor sentiment weakened after the 10-year Treasury yield crossed the 3% mark.
- High Beta (SPHB ) is the worst performer for the second consecutive week, tumbling by 1.30%.
- The broad market (SPY ) reversed the previous week’s tepid gains, declining nearly 1% in the past five days.
- Equal Weight (RSP ) is the best performer from the pack this week with a drop of just 0.50%.
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Major Index Review
- Major indexes were all down on fears money flows will start to shift to bonds after yields surged.
- European and Asia Pacific equities (EFA ) posted the smallest losses for the week, falling by just 0.27%, as ECB signaled it would maintain its easy money policy unchanged for the coming period. (EFA ) is also the best performer for the rolling month, up 2%.
- Technology stocks (QQQ ) were the worst performers from the bunch, shedding 1.52% of its value this week, as heavyweights such as Alphabet (GOOG), Apple (AAPL) and Netflix (NFLX) posted declines. Facebook, meanwhile, offset some losses after the stock surged, thanks to blockbuster earnings. Technology stocks are also one of the worst performers for the rolling month, down more than 2%.
- To see how these indices performed a week before last, check out ETF Scorecard: April 20 Edition.
- Sectors were mostly down.
- The energy sector (XLE ) was the best performer this week, thanks to rising oil and gas prices. (XLE ) is also the best performer for the rolling month with a solid advance of 9.3%.
- The industrial sector (XLI ) has shed nearly 4% in the past week, taking the monthly performance into negative territory of 2%.
- Consumer staples (XLP ) have fallen the most for the rolling month, down 2.28%.
Foreign Equity Review
- Foreign equities were mixed.
- Germany (EWG ) dropped by 1.45% in the past week, representing the worst performance from the pack.
- Meanwhile, Chinese equities (FXI ) advanced tepidly by 0.26%, enough to become one of the best performers this week.
- British equities (EWU ) are again the best monthly performers with a rise of 4.51%, while Russia (RSX ) unsurprisingly remains the worst performer as it lost nearly 6%.
- To find out more about ETFs exposed to particular countries, check our ETF Country Exposure Tool. Select a particular country from a world map and get a list of all ETFs tracking your pick.
- Commodities were mixed.
- Natural gas (UNG ) recorded the biggest gains this week, increasing by nearly 4% as supplies have been falling at a faster pace than expected. (UNG ) is also the best performer for the rolling month with an impressive advance of nearly 4%.
- After a few weeks of impressive gains, silver (SLV ) is the worst performer for the week with a decline of 3.53%.
- Gold (GLD ) disappointed the most for the past 30 days, shedding 1.8% of its value.
- The U.S. dollar (UUP ) is seemingly breaking the string of losses, coming in as the best performer both for the week and the rolling month, up 1.52% and 2.69%, respectively, largely due to surging Treasury yields.
- The Australian dollar (FXA ) declined by 1.54% in the past five days, representing the worst performance from the pack.
- The Japanese yen (FXY ), meanwhile, was the worst performer for the rolling month, dropping by as much as 3.32%.
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Disclosure: No positions at time of writing.