Tag: ETF economic and industrial analysis

By Matt Wagner , CFA, Associate, Research A bird in the hand is worth two in the bush.[1] In investing, this describes investors’ preference for  dividends  (the bird in the hand) relative to future price appreciation (two in the bush).

The reopening trade is putting rising Treasury yields and small cap ETFs in the growth-fueled spotlight. This should spur an interest in ETFs like the iShares Floating Rate Bond ETF (FLOT)   and the iShares Russell 2000 ETF (IWM) .

By Roman Chuyan, CFA In this article, I review the recent rise in yields and in inflation expectations, and what it might mean to bond and equity investors. Treasury yields have jumped sharply so far in 2021 on concerns about rising inflation.

Is the stock market disconnected from the economy? Perhaps, but less so lately. Also, looking under the hood of performance trends over the past year reveals a more nuanced relationship. Before getting to the many unique characteristics of the COVID-19 cycle, an important reminder to investors is that stocks tend to lead the economy.

2020 is destined to become a year that will be remembered just by mentioning two digits, much like ’87, ’01, and ’08 have become synonymous with the events of each respective year. All someone will need to say is “remember ’20,” and we’ll know everything that number entails—from the pandemic to the presidency, and a lot in between.

Last week, equities tumbled as Treasury yields surged, but rising bond yields don’t always lead to long periods of under-performance for stocks. What’s pivotal in this equation is for investors to assess why bond yields are rising in the first place, and whether the scenario boils down to one of two examples. “The answer to that question depends on the reason why interest rates are rising.

Being on the path to recovery for 2021 means accounting for risks and pushing through tricky areas. In the global market outlook from T. Rowe Price, “ Managing to the Other Side ,” CIOs David Giroux, Equity and Multi-Asset, Justin Thomson, International Equity, and Mark Vaselkiv, Fixed Income, explored the ways to look at 2021 and seek fixed income yield with acceptable risk in today’s market.

As investors look to the markets ahead, it is important to considers ways to prepare for both cyclical and secular changes. In the recent webcast, Barbell Cyclical and Secular Change: Balancing Opportunities and Risks , Michael Arone, Chief Investment Strategist, SPDR, State Street Global Advisors, highlighted the shift in factor trends that took place in the fourth quarter of 2020, with cyclical size and value factors taking charge. “Size and Value rallied hard off the vaccine news, while Quality held up better than Momentum, given the potential for an uneven recovery,” Arone said.

Economic growth is picking up as the vaccine rollout gains speed, commodity prices are heading higher, the government is proposing another large fiscal aid package, and the Federal Reserve is pledging to keep its very easy monetary policy intact for the foreseeable future.

By Brandon Rakszawski, Senior ETF Product Manager, VanEck The  Morningstar ®  Wide Moat Focus Index SM  (the “Index”) finished an up-and-down January slightly negative for the month but ahead of S&P 500 ®  Index by more than 40 basis points (-0.58% vs. -1.01%, respectively).

As the innovation economy continues to drive performance in 2021, investors can look to exchange traded fund strategies to access new growth opportunities. In the recent webcast, Breaking the Mold: Approaching Innovation as a Fundamental Factor , Brian Levitt, Global Market Strategist, Invesco, outlined the nascent economic recovery and the potential for a drawn out rebound. “This new business cycle will likely play out every multiple years and that monetary policy will likely be accommodative for the foreseeable future,” Levitt said. “It appears that the economy is poised to accelerate, and that fiscal and monetary policy will be increasingly supportive,” he added.

Given the unfortunate second wave of the COVID-19 pandemic, it’s easy to focus solely on what the negative impact could mean for the U.S. economy. However, somewhat lost in the shuffle of data headlines is one sector of the U.S. economy that has been able to actually outperform expectations: manufacturing.

Our research shows the GameStop controversy is localized in stocks. This has been a strange week. Never before has social media been used to move large chunks of the stock market and rattle parts of the thick-skinned hedge fund industry.

In our 2021 outlook, we unveiled a visual highlighting the “K-shaped” nature of the COVID era, as seen below. In this report, we’ll share our thoughts on these divergences; including which are likely to persist, and which are already starting to converge.