ETF & Mutual Fund Watchlist for October 10, 2018

Technology and transportation pulled the markets lower this week. The Dow Jones Industrial Average and S&P 500 Index continued to benefit from exposure to outperforming value sectors.

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Short-term selling has been heavy this week.

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Technology has weakened with semiconductors as trade and cybersecurity threats in China have escalated. Financials and healthcare were strong outperformers.

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Investors opted for utilities amid the decline in stocks, despite rising interest rates. Consumer staples also benefited, while materials lagged.

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Financial funds were strong nearly across the board this week. Small and regional banks have outperformed with rising rates and widening spreads.

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Technology saw broad weakness across its subsectors.

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Value stocks have underperformed consistently as technology outperformed.

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The U.S. Dollar Index weakened slightly on the week as the euro bounced from lows last week, but the U.S. markets still outperformed foreign shares by a considerable margin.

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Bond yields pulled back on Monday and Tuesday, but they spiked on Wednesday. Long-term government bonds rebounded strongly mid-week and then faded. However, rising credit risk weighed on markets. Floating-rate funds remain among the strongest performing class of fixed income amid rising rates.

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Dividend funds are outperforming the market as investors hold value stocks. iShares Core High Dividend (HDV) gained on the week. Low-volatility and high dividend funds in conservative blue chips are seeing their best relative performance in several months.

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Some low-volatility funds are up on the week due to heavy utilities exposure. USMV has bested these funds, at times by a considerable margin, with a more diversified portfolio. It is best to stick with diversified low-volatility funds with rates still in an uptrend.

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