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.
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%.
An up-and-down week for U.S. stock markets with all major U.S. broad market stock indexes ending lower on the week. U.S stock markets moved higher on Monday despite the Trump administration extending social distancing guidelines through the end of April. The continued increase in reported coronavirus cases and fatalities and the Trump administrations statement that there may be as many 240,000 U.S. coronavirus fatalities combined with a much larger-than-expected increase in jobless claims on Thursday and a worse-than-expected payroll report on Friday pushed U.S. stock markets lower for the week (though President Trump’s announcement on Thursday that Saudi Arabia and Russia would implement large oil production cutbacks helped boost not only the price of oil but also moved U.S. stock markets momentarily higher). At week’s end the S&P 500 Index lost 2.1% to close at 2,488.65, the 10-year U.S. Treasury rate fell 9bps to 0.60% and the U.S. dollar (as measured by the DXY Index) strengthened 2.4%.
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.
Yet another volatile week for bond and stock markets, though this time U.S. stock markets ended the week higher. Monday’s FOMC announcement of unlimited Treasury and mortgage backed securities buybacks along with three new lending programs to support consumer and corporate credit did little to buoy U.S. equity markets with the U.S. Senate’s inability to pass a $2 trillion coronavirus stimulus package Sunday and again on Monday weighing heavily on market sentiment. Reports on Tuesday that the Senate was close to approving the stimulus package reversed market sentiment pushing U.S. stock markets significantly higher despite sharply lower Europe and US PMI composite flash indexes. (The Dow Jones Industrial Average increased over 11%, its largest one-day gain since 1933, and the S&P 500 Index increased over 9%.) U.S stock markets moved sharply higher again on Thursday, despite record high jobless claims, after the Senate finally approved the stimulus package and as a result of the ECB restarting its debt buyback programs. Emerging concerns that central bank action and government stimulus packages may not be sufficient to forestall a recession helped move the S&P 500 Index over 3% lower and the 10-year U.S. Treasury rate down by 17bps to 0.68% on Friday. At week’s end the S&P 500 Index increased 10.3% to 2,541.47, the 10-year U.S. Treasury rate fell 16bps to 0.68% and the U.S. dollar (as measured by the DXY index) weakened by 4.3%.
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.