Yahoo Finance Top ETF Stories of November
The month of November was not exactly sweet for the global stocks and the related ETFs; it was rather mixed due to a host of downbeat factors. Global growth worries, a still-faltering Chinese financial market, high chances of a Fed lift-off in December and terror attacks in Paris made investors edgy in the month.
Though the start of the all-important holiday shopping season and supportive policies in other developed economies gave the much-needed support to the global market, it wasn’t sufficient to shower strong gains on investors.
Among the top ETFs, investors saw U.S. ETFs advance slightly with SPY adding 0.3%, DIA gaining 0.12% and QQQ moving higher by about 0.25% in the month (as of November 27, 2015). The all-world ETF ACWI retreated 1% while the emerging market-based ETF VWO shed 3.7% during the same timeframe (read: Bridgewater Slashes EM ETF Exposure; Should You?).
As a result, the investing cohort must be keen on knowing the top financial stories of November in detail and on checking their impact on the ETF world.
The Strongest Ever Bet on Fed Lift-Off & Flattening of the Yield Curve
Instead of any market participant, the Fed itself came up with solid cues of a lift-off in December when it mentioned the timeline in its October meeting. The easing of the upheaval in the global market, an impressive job report, a stronger-than-expected durable goods’ reading and better-than-expected income levels led the Fed to mull over policy tightening this year.
Plus there was an upward revision in the Q3 GDP (from 1.5% to 2.1%) indicating that the U.S. economy is taking root and is prepared to take in the first rate hike almost after a decade. Rising fears of the Fed’s benchmark interest rates’ hike lowered the appeal for short-term bond ETFs. As a result, yields started rising faster on the low-and-middle part of the yield curve rather than the long end.
Yield on the 6-month Treasury note climbed 11 bps from the 0.27% level seen at the start of November to 0.38% on November 27. In the same time frame, the yield on the 10-year Treasury note rose just 2 bps to 2.22% from 2.20%. The yield gap between 2-year and 10-year bonds squeezed to the lowest level seen in nine months, per Wall Street.
The inverse bond ETF iPath US Treasury Flattener ETN (FLAT) added 0.3% in the month. Sectors benefitting from higher rates showed strength in recent trading. Financial ETFs like SPDR S&P Regional Banking ETF (KRE) and iShares US Broker-Dealers (IAI) gained 3.8% and 3.6%, respectively.
Sector ETFs unlikely to be favored by higher rates underperformed. Utilities Select Sector SPDR ETF (XLU) lost 2.4% and Vanguard REIT ETF (VNQ) was down about 1% despite a strong operating environment on increased activity in the U.S. economy (read: Q4 Outlook for REIT ETFs).
Parris Terror Attack
On Nov 13, the worst terror attack (by Islamic group ISIS) in Europe in over a decade struck Paris. As expected, the entire risk-pro global investing backdrop was stranded after the attack; though the market gained ground in a short while.
As payback, France launched several air raids and bombed Islamic State targets in Syria. Among the major losers from this incident are iShares MSCI France (EWQ) and travel-related ETFs like U.S. GLOBAL JETS ETF (JETS). However, defense ETFs like iShares US Aerospace and Defense ETF (ITA) benefitted from the incident (read: Paris Attack Put These Sector ETFs in Watch).
Return of Chinese Uproar
China has become instrumental in driving several key activities in the market lately. In October, China reduced the key interest rates by 25 bps which marked the sixth slash since last November and also enacted a volley of other accommodative measures. As a result, Chinese equities started off November on a decent note but failed to hold on to the massive gains earned throughout the month.
News that the Chinese securities regulator had strengthened its investigation into brokerages led Chinese stocks to suffer the deepest plunge on November 27 since the August bloodbath. China A-Shares ETF Market Vectors ChinaAMC SME-ChiNext ETF (CNXT) was off 9.3% on November 27 and finally retained 2.6% of monthly gains. Other China equities ETFs also followed suit.
No Respite for Metal
Metals were slaughtered in the month. The double whammy of flagging global growth, suppressing demand and the strength of the greenback in the wake of U.S. policy tightening weighed heavily on metal ETFs.
U.S. dollar ETF UUP added over 2.2% in the month while Gold ETF SPDR Gold Shares (GLD) was off 8.6% in the month. Other metal ETFs that were hammered in the month were First Trust ISE Global Platinum Index Fund (PLTM) and ETFS Physical Palladium Shares (PALL) which lost 13.4% and 19.1%, respectively.
The wide usage of these two metals in the auto industry was mainly behind this massacre as the Volkswagen scandal put demand for these metals in question. Also, car loans will be pricier following the rate hike and may hurt auto sales (read: Surprise Loser and Gainer from VW Scandal: Metal ETFs).
Potential of Obama Care at Stake
The success of the Affordable Care Act, the firepower of the Obama administration and a driver of every aspect of the broader health care sector so far, is now being questioned. The questions were raised in the backdrop of the outlook cut for Q4 and the full year by one of the biggest insurers UnitedHealth Group (UNH), as well as an indication that the company may exit from ObamaCare.
The company is unsure of the potential strength and success of its ObamaCare exchange business. The news shook the entire industry as UNH’s peers including Aetna (AET), Cigna (CI) and Humana Inc. (HUM) shed gains on November 19. iShares U.S. Healthcare Providers ETF (IHF) was the biggest loser on the news as it declined 0.3% in the month (as of November 27, 2015) (read: UnitedHealth Crushes Managed Healthcare Stocks & ETFs).
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IPATH-UST FLATN (FLAT): ETF Research Reports
SPDR-KBW REG BK (KRE): ETF Research Reports
ISHARS-US BR-D (IAI): ETF Research Reports
SPDR-UTIL SELS (XLU): ETF Research Reports
VIPERS-REIT (VNQ): ETF Research Reports
ISHARS-FRANCE (EWQ): ETF Research Reports
US GLOBAL JETS (JETS): ETF Research Reports
ISHARS-US AEROS (ITA): ETF Research Reports
MKT VEC-CHINAMC (CNXT): ETF Research Reports
FT-ISE GLBL PLT (PLTM): ETF Research Reports
ETFS-PALLADIUM (PALL): ETF Research Reports
ISHARS-US H C P (IHF): ETF Research Reports
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