While cutting losers has always been investing best practice, COVID19 lends a renewed imperative to this endeavor. The unpopular, yet unequivocal, reality is that not every company will survive this maelstrom—entire swaths of the economy will be subject to irretrievable impairment. This problem may the chief focus of the XOUT index, as owning potentially clear stock market losers is a luxury investors may no longer afford.
GraniteShares ETFs is pleased to announce that its latest fund launch XOUT won the Best New Smart Beta ETF Award from ETF.com! We are thrilled to receive this distinguished industry recognition for XOUT, which flips the investment paradigm by seeking to exclude losers from the portfolio as opposed to trying to pick winners. Since XOUT launch 10/7/19 through 3/31/20, the XOUT Index outperformed the market by 5.1% by using this indexed methodology.
The ‘08 Financial Crisis is often raised as a benchmark for the current market turmoil, but the 1929 crash unleashing the Great Depression may be a more fitting proxy. Join us as we examine how the unprecedented market conditions are impacting gold.
The hurricane cone of market uncertainty radically expanded from where it had stood only moments early at Tuesday 9:59 am, with the emergency cuts raising previous obscure possibilities to the forefront. Examining the fallout provides an empirical illustration of gold’s role in the portfolio during market stress, illuminating not only surprises but outright oddities emanating from the market tumult.
The mathematical reality is that the venerable 60/40 was a sub-optimal investment in 2019—simply adding gold, and in any quantity, would have immediately improved portfolio efficiency. Even during a historic year for bonds, substituting gold for fixed income exposure in 2019, in any amount, automatically constructed a superior 60/40 portfolio. While sacrilegious to the extreme, these insights merely combine the 70 year old lessons of Modern Portfolio Theory with gold’s ability to buffet market volatility.
One of the prime rationales for a gold allocation is introducing an uncorrelated driver of returns to stock and bond exposures, two fundamental building blocks for most standard portfolios. The challenge is, for many investors the search for diversifying assets begins and ends with gold, when there exists an entire ecosystem of precious metals just over the horizon.
Buoyed by increasing hopes regarding a coronavirus vaccine and increasing expectations of economic recovery spurred by easing lockdown restrictions, the S&P 500 Index increased 2.7% through Wednesday. Concerns surrounding U.S.-China tensions, inflamed by China’s Hong Kong security restrictions, pushed the S&P 500 Index off Wednesday’s high on Thursday only to see those losses recouped on Friday after President Trump’s announcement of measures against China were less harsh and encompassing than originally feared. Markets all but ignored weak economic reports last week, including an almost 14% decline in consumer spending reported Friday, with investors focusing instead on increased hopes and expectations of economic recovery. Jerome Powell, speaking Friday, said the fundamentals of the U.S. economy remain strong but with the coronavirus posing risks to growth and said the U.S. Federal Reserve Bank continues to use its tools to support the economy. At week’s end the S&P 500 Index increased 3.0% to 3,044.31, the 10-year U.S. Treasury rate was unchanged at 0.66% and the U.S. dollar (as measured by the DXY Index) weakened 1.6%.
GraniteShares, a new kind of exchange-traded fund (ETF) company, has accumulated over $1 billion in assets under management (AUM) in just three years. GraniteShares’ recent growth has been fueled by its flagship gold ETF, BAR, which has swelled to over $917 million in AUM as investors seek safe-haven assets amid coronavirus-inflicted market volatility.
Up over 3% Monday on positive news regarding Moderna’s development of a coronavirus vaccine, the S&P 500 Index zigzagged the rest of the week finishing very close to Monday’s level. Initial optimism over Moderna’s progress was partially offset by doubts and questions over the value of the initial results on Tuesday, pushing the S%P 500 Index about 1% lower on the day. Continued easing of restrictions throughout the U.S. with increasing expectations of stronger economic growth moved the S&P 500 Index higher by almost 2% on Wednesday only to see some of those gains reversed on Thursday with the weekly jobless claims report showing initial claims of 2.4 million. The S&P 500 Index closed the week up 3.2% at 2,955.46, the 10-year U.S. Treasury rate rose 1bp to 0.66% and the U.S. dollar (as measured by the DXY Index) gave up last weeks gains, weakening 0.6%.
U.S. Federal Reserve Bank Chairman Powell’s “highly uncertain” economic outlook comments, larger-than-expected declines in both CPI and PPI and emerging concerns regarding reopening “too soon” pushed the S&P 500 Index almost 4% lower through Wednesday. Despite worse-than-expected jobless claims and a record decline in retail sales and industrial production, stronger-than-expected financial sector earnings reports helped moved the S&P 500 Index off its lows on Thursday and Friday. At week’s end the S&P 500 Index fell 2.3% to 2,853.70, the 10-year U.S. Treasury rate fell 4bps to 0.65% and the U.S. dollar (as measured by the DXY Index) strengthened 0.6%.
Both Wednesday’s ADP and Friday’s BLS employment situation reports showed over 20 million job losses in April with Friday’s BLS report also showing an increase in the unemployment rate to 14.7%, a level not seen since the Great Depression. Nonetheless, U.S. stock markets moved higher last week, relegating the employment reports and Thursday’s jobless claims to history and instead focused on strong tech earnings reports, the continued re-opening of states and countries and an apparent easing of tensions between the U.S. and China. At week’s end the S&P 500 Index rose 3.5% to close at 2,929.80, the 10-year U.S. Treasury rate increased 7bps to 0.69% and the U.S. dollar (as measured by the DXY Index) was unchanged.
With guarded optimism surrounding the re-opening of some states, positive news regarding Gilead’s Covid-19 treatment remdisivir and the FOMC declaring the U.S. Federal Reserve would maintain its unprecented accomodative monetary policy to support the economy, the S&P 500 increased 3.6% through Wednesday. The increase came despite a larger-than-expected 4.8% decline in Q1 GDP. Thursday’s reports showing a large drop in U.S. consumer spending and intial jobbless claims of 3.84 million pushed the S&P 500 Index off its highs of the week while disappointing earnings reports from tech and oil companies and a much larger-than-expected decline in the ISM manufacturing index erased all gains on the week with the S&P 500 index dropping 2.8% on Friday. The U.S. dollar, affected by both disappointing economic reports and earnings and the FOMC’s announcement on Wednesday, weakened significantly, At week’s end the S&P 500 Index decreased 0.3% to close at 2830.71, the 10-year U.S. Treasury rate increased 1bps to 0.62% and the U.S. dollar (as measured by the DXY Index) weakened 1.7%.
Plunging oil prices early last week moved U.S stock markets significantly lower, strengthened the US dollar and moved 10-year U.S. Treasury rates lower. Down nearly 5% through Tuesday, the S&P 500 Index moved higher the remainder of the week as oil prices rebounded off their lows (see oil comments). A slew of more-negative-than-expected economic data – including the PMI Composite Flash Index, durable goods orders and jobless claims – seemingly did little to move U.S. stock markets last week. At week’s end the S&P 500 Index fell 1.3% to close at 2,836.74, the 10-year U.S. Treasury rate fell 4bps to 0.61% and the U.S. dollar (as measured by the DXY Index) strengthened 0.5%.
A see-saw week for U.S stock markets, pushed and pulled by competing pressures of extremely weak economic data and poor earnings reports on the one hand and growing optimism surrounding re-opening the economy and substantive progress in the development of COVID-19 treatments on the other. A much weaker-than-expected retail sales report on Wednesday and another large jobless claims number along with a large decline in new homes sales and in the Philadelphia Fed manufacturing index on Thursday worked to offset reduced coronavirus fears leaving U.S. stock markets almost unchanged through Thursday. President Trump’s announcement of plans to re-open the economy Thursday night followed by news of promising results for a COVID-19 treatment pushed U.S. stock markets up 2% -3% on Friday. At week’s end the S&P 500 Index increased 3.0% to close at 2,874.56, the 10-year U.S. Treasury rate fell 9bps to 0.64% and the U.S. dollar (as measured by the DXY Index) strengthened 0.3%.
U.S. stock markets surged (despite 6.6 million initial jobless claims) , longer-term U.S. Treasury rates rose and the U.S. dollar weakened last week on the back of the U.S. Federal Reserve Banks’ $2.3 trillion program to finance bank loans made through the emergency small-business lending program and on hopes the toll of the coronavirus would be lower than anticipated. At week’s end the S&P 500 Index surged 12.1% to close at 2,789.82, the 10-year U.S. Treasury rate increased 13bps to 0.73% and the U.S. dollar (as measured by the DXY Index) weakened 1.1%.