The markets appear to have shrugged off concerns from Irma, North Korea, and the month of September. September is typically the most challenging month of the year, but it precedes a market boom as we head into the holiday season.
The largest move that has occurred so far was on Monday (9/11), as the market sharply rebounded after a small decline on concerns that Hurricane Irma could pose a significant threat to Florida’s economy as well as insurance and reinsurance companies alike. The hurricane was largely less extreme than was predicted, allowing the market to take a breather from potential risks and enjoy market gains. At the same time, markets had been pricing in the possibility that North Korea could test another nuclear weapon (coinciding with a North Korean holiday last weekend). This test did not materialize, and the threat appears to be taking a back seat to risk-taking in the market.
It’s uncertain whether this reprieve will be sustained. However, most indicators in the U.S. market continue to suggest growth and that the small sell-offs we’ve seen over the past few weeks will be the exception rather than the norm for the time being.
Sectors: The leading Sector Benchmark ETFs exhibited further positive shifts over the past week. Health Care and Materials rose, and Telecoms fell significantly. Momentum scores of most sectors increased for the week. The only exception was Telecommunications. Financials broke even, coming out of the red. The spread between the highest and lowest increased from 35 to 49. In terms of ranking organization, there appears to be no general trend between cyclicals and defensive sectors, continuing last week’s trend. Technology, which increased slightly, performed just above Utilities (a typically defensive sector). Energy improved significantly from last week, though it is still slightly negative. A mostly positive increase in momentum for most sectors suggests the potential for a market increase.
This all occurred as the market breathed a sigh of relief that the effects of Irma were less than expected and the anticipated nuclear tests of North Korea did not occur.
Factors: The leading Factor Benchmark ETFs all had positive results for the week. Momentum and Growth remain in the lead, though Growth slightly edged out momentum. High Beta and Value remain at the bottom. Risk-off factors such as Quality, Yield, and Low Volatility were dispersed. Quality was in the center, Yield was lower, and Low Volatility was toward the top. The overall momentum ranking for all factors increased once more last week, with the average momentum score changing from 5.7 to 10.6. The spread lowered from 19 to 15.
Global: Rankings in the leading Global Benchmark ETFs were mixed last week. Latin America and China remain at the top of the rankings. Overall momentum scores have risen slightly for the week. Developed countries climbed the most, with USA increasing from 5 to 12 and the UK increasing from 6 to 16. Emerging markets increased slightly, from 28 to 31. The average momentum score globally increased from 18.3 to 25.1. USA and Japan were at the bottom in terms of absolute rank. Developed markets seem to be on the rise for the week, as Canada also increased from 16 to 24, another jump of 8 points after the previous week’s rise of 8.
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