Investors’ risk-on attitude pushed markets to new highs last week, and our benchmark ETFs continue to indicate more bullishness. This is due to an overall increase in momentum scores. The only sector that experienced a decrease in momentum was Industrials. Technology is still the highest-ranked sector that had an increase in momentum score over the past week, from 27 to 29. With a rise in oil prices over the past week, Energy’s negative momentum decreased from -14 to -9.

Sectors: The leading Sector Benchmark ETFs exhibited minor shifts last week. Technology continues to be at the top of the leaderboard, with Health Care right behind. Industrials and Discretionary flipped places, as did Utilities and Real Estate. The spread between the highest and lowest sectors decreased from 48 to 41 this past week. Telecom continues to improve, from -21 to -12, but is still at the bottom of the sector list. These are the only two sectors that exhibited negative momentum last week, since Consumer Staples changed from -3 to 2.

Technology and Materials, cyclical sectors, are still near the top, while Consumer Staples and Telecommunications, more defensive sectors, are near the bottom. Energy, in what looks like a retracement, is within a longer-term downtrend, reducing its negative momentum score as previously mentioned.

Factors: Momentum, Growth, and High Beta continue to be the top factors among our Factor Benchmark ETFs. The current factor rankings confirm the “risk-on” nature of the markets at the moment. Low performance of more defensive factors, such as Low Volatility, Dividend Growth, and Yield, strengthens these observations. The overall increase of momentum scores for all factors except Momentum (-1 change) and Yield (0 change) might suggest investors are cautious with their “risk-on” bets. Three factors have momentum scores greater than 20 (compared to two the previous week), and the sum of the top-three ranking scores is 76 (compared to 70 the previous week). The cautiously risk-on observation mentioned previously is evident from the rise in the sum of the bottom-three momentum scores, from 15 to 22.

Global: There were slight shifts in rank and overall momentum levels among the Global Benchmark ETFs, with most exposures’ momentum rising from last week. The top-ranked regions still include China, Emerging Markets, and Latin America. The rankings suggest investors are putting capital to work overseas in regions now believed to be economically and politically stable and growing. China continues to be at the top of the ranks with an increasing momentum score, from 46 to 48. USA, UK, and Japan continue to be ranked last. The rankings don’t necessarily mean that the leading regions will have the most prosperous economies going forward, but they do indicate that momentum has increased in those economies. The current Global rankings also suggest a risk-on appetite when looking at investment exposures on a global level.

Two Week EdgeChart 07/26/17

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