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Asset Class Scoreboard – Eli Manning Edition

Coming into the month of October, the Asset Class Scoreboard was looking brutal , with six of the eight asset classes we track in the red on the year. We mentioned it was time for the star of the portfolio to show up the last three months of the year, and it seems like they heard us… Seven of the eight asset classes in October recorded positive numbers in October, with Managed Futures the only asset class in the negative, down -0.86% on the month. Stocks, World Stocks, and Real Estate all recorded 6%+ returns for the month on the heels off the Fed deciding not to raise rates in 2015 (although now there’s talk of December being back in play). But we can’t help but wonder if October’s great numbers are a little bit like the Manning brothers in action on Monday, where Eli Manning was the first QB in NFL history to throw six touchdowns, no interceptions, and still lose the game . Are these October returns just a few touchdown passes on the way to a losing game (the year) or are they the start of a comeback? It feels like the back and forth of that Giants/Saints game, where Eli had to score 6 touchdowns, because the other guy had 5 already. On the investment side, you have to have big returns just to make up for those poor ones a few months ago. This is what volatility looks like in real life – scoring a touchdown/giving up a touchdown, winning/losing, winning again, losing again. October was just the start of the fourth quarter… we’ll see who has the ball last in this game and wins the year. (click to enlarge) (Disclaimer: Past performance is not necessarily indicative of future results.) Source: All ETF performance data from Morningstar.com . Sources: Managed Futures = Newedge CTA Index, Cash = 13 week T-Bill rate, Bonds = Vanguard Total Bond Market ETF (NYSEARCA: BND ), Hedge Funds = IQ Hedge Multi-Strategy (NYSEARCA: QAI ) Commodities = iShares GSCI ETF (NYSEARCA: GSG ), Real Estate = iShares DJ Real Estate ETF (NYSEARCA: IYR ), World Stocks = iShares MSCI ACWI ex US Index Fund ETF (NASDAQ: ACWX ), US Stocks = SPDR S&P 500 ETF (NYSEARCA: SPY ).

October ETF Asset-Flow Roundup

After a tumultuous Q3, it might be wise to look at how the $2.1 billion ETF industry performed in the first month of fourth-quarter 2015. Overall, the month came as a breather after a throttling third quarter. The major U.S. indexes finished October on a positive note on a stabilizing global economy, the promise of further monetary stimuli from the global superpowers and a dovish Fed. Let’s take a look at the corners that were the hot favorites of investors and those that were casted out. Our study concludes that income and international ETFs were the star performers in terms of asset gathering as these saw maximum inflows while the broader U.S. market was the laggard. Gainers High-Yield Bonds – SPDR Barclays High Yield Bond (NYSEARCA: JNK ) Hopes of a delayed Fed rate hike pushed bond yields down in October and investors piled up cash in high-yield bond ETFs, both for income and growth. Moreover, junk bonds are well attached with the energy sector. As energy securities cover about 16% of the high-yield bond market, a recovery in oil prices bode well for high-yield ETFs in the month. Thanks to this trend, JNK, a popular junk bond ETF, was at the helm, having added over $2.6 billion in assets in the month. This propelled its AUM to $11.9 billion. Two other junk-bond ETFs, iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEARCA: LQD ) and iShares iBoxx $ High Yield Corporate Bond ETF (NYSEARCA: HYG ) also added about $2.52 billion and $2.23 billion, respectively, to their asset base and took the second and third spots. LQD and HYG ended the month with about $24.7 billion and $15.4 billion, respectively. Nasdaq – PowerShares QQQ (NASDAQ: QQQ ) Technology earnings have turned out pretty well this season with the numbers not only bettering pre-season expectations, but also outperforming the sector’s performance in other recent quarters. This boosted investors’ lure for the tech-heavy Nasdaq ETF QQQ which took the fourth rank. QQQ hauled in about $1.73 billion to exit the month with $37 billion in assets. Europe – iShares MSCI EMU ETF (NYSEARCA: EZU ) The European markets roared back in the month on the European Central Bank (ECB) president Mario Draghi’s reassurance of a more intensified and protracted QE measure, if need be. Sensing further easing potential, STOXX 600 added about 8% in October underscoring the largest monthly rally in six years. Investors also poured in $1.56 billion, the fifth largest in the list, to be part of this rally. EZU has now amassed over $13 billion. Losers U.S. – SPDR S&P 500 ETF Trust (NYSEARCA: SPY ) Despite the Fed-induced bounce, U.S. stocks – small and large – could not rope in investors’ attention. While global growth fears weighed on the S&P 500-based large-cap ETF SPY, a volley of weak U.S. economic data came in the way of Russell 2000-based small-cap ETF iShares Russell 2000 (NYSEARCA: IWM ). After all, U.S. economic growth tallied 1.5 % in Q3, falling short of expectation of 1.6%. The products, SPY and IWM, witnessed an outflow of about $827 million and $632 million, respectively. Short-Term U.S. Bonds – iShares 3-7 Year Treasury Bond ETF (NYSEARCA: IEI ) Though the bet over a faster rate hike eased in October, the investing world has started to prepare for a Fed lift-off by this year-end or early next year. Since short-term bonds are expected to underperform the most on an expected rise in benchmark interest rates, short-term bond ETFs fell out of investors’ favor. Moreover, short-term bond ETFs sport meager yields – another reason for the disfavor to yield-starved investors. Hence, IEI had to sacrifice about $511 million in net assets while iShares Short Treasury Bond ETF (NYSEARCA: SHV ) surrendered about $507 million. Biotechnology – iShares Nasdaq Biotechnology (NASDAQ: IBB ) Nagging concerns over the biotech space regarding the over pricing of life-saving drugs shifted this hot and soaring sector from its lofty position a bit. Though the downing trend is reversing lately, October was an off month for the biotech sector. The biotech fund IBB saw a net exodus of about $497 million in assets. Original Post

Best-Performing Vanguard Mutual Funds In Q3 Of 2015

Calling the third quarter a bloodbath will not be far from the truth. In this quarter, the Dow, S&P 500 and Nasdaq declined 7.6%, 7% and 7.4%, respectively. In the third quarter, just 17% of mutual funds managed to finish in the green. China-led global growth fears, uncertainty about the Fed rate hike followed by the no lift-off decision, the sell-off in biotech stocks and tumbling commodity prices, among other factors, resulted in the worst quarter in four years. In a quarter ravaged by such headwinds, mutual funds from the Vanguard Group gave a decent performance. Its best gain hit 8.4%, achieved by Vanguard Extended Duration Treasury Index Fund Institutional (MUTF: VEDTX ). This fund, which requires a minimum initial investment of $5,000,000, was in fact the top performer among the Long Government Bond Funds. The commendable gain came not only when the markets suffered a rout, but at a time when the U.S. Fed was preparing for a possible rate hike at the end of this year. As for the worst performer, Vanguard Precious Metals & Mining Fund Investment (MUTF: VGPMX ) slumped to a loss of 21.9%. This was in line with the performance of the fund category. Morningstar data showed that the Equity Precious Metals category had lost 19.4% in the third quarter. Vanguard’s Q3 Performance vs. Q2 Popular for offering the no-load mutual funds, the top-performing Vanguard funds gave a better performance than those in the second quarter. As mentioned earlier, VEDTX gained 8.4%. In the second quarter, Vanguard’s top performer was the Vanguard Health Care Fund (MUTF: VGHAX ), which had gained just 3.8%. However, the magnitude of losses increased significantly in the quarter. Of the 258 funds under our study, 79 funds ended in the positive territory in the third quarter. The average gain for these 79 funds was 1.9%. This was an improvement from the average 0.8% gain scored by 101 Vanguard funds that had finished in the green in the second quarter. However, in the third quarter, the remaining 179 funds finished with losses averaging -8%. In the second quarter, of the 257 funds under our study, 156 funds had ended in the negative territory, with an average loss of 1.8%. Among the 79 gainers in the third quarter, only 8 funds posted above 5% return. On the other hand, 58 funds posted returns lower than 2%. Out of the 179 funds that finished in the red this time, only 30 funds had a sub-5% loss. Meanwhile, 45 funds lost by at least 10%. (Note: These numbers include same funds with varied asset classes.) Vanguard’s performance in the third quarter was also relatively better than that of many of its key peers. For instance, its top gaining fund had higher returns than the best gainers from Fidelity, BlackRock (NYSE: BLK ), Wells Fargo (NYSE: WFC ) and American Funds. In the second quarter, Vanguard had failed to beat any of these fund families. However, this time, it failed to beat the third-quarter performance of T. Rowe Price (NASDAQ: TROW ). Top-Performing Vanguard Mutual Funds Fund Name Objective Description Q3 Total Return Q3 % Rank vs. Obj. YTD Total Return % Yield Expense Ratio Beta vs. S&P 500 Vanguard Long-Term Treasury Inv Government 5.44 2 0.08 2.63 0.2 -0.04 Vanguard Long-Term Inv-Gr Inc Inv Corp.-Inv. 2.63 1 -2.29 4.18 0.22 0.03 Vanguard Long-Term Bond Index Inv Dvsfd Bond 2.32 1 -2.49 3.97 0.18 -0.01 Vanguard CA Long-Term T-E Inv Muni CA 2.08 8 1.88 3.12 0.19 -0.05 Vanguard MA Tax-Exempt Fd Muni State 2.01 2 1.79 2.68 0.15 -0.04 Vanguard Interm-Term Treasury Inv Government 2 5 2.77 1.58 0.2 -0.02 Vanguard OH Long-Term Tax-Exmpt Fd Muni State 2 2 1.95 2.96 0.15 -0.03 Vanguard REIT Index Inv Real Est 1.95 35 -4.49 3.77 0.26 0.55 Vanguard NY Long-Term T/E Inv Muni NY 1.88 7 1.8 2.91 0.19 -0.01 Vanguard PA Long-Term Tax-Exmpt Inv Muni State 1.88 4 1.81 3.17 0.19 -0.02 Vanguard Long-Term Tax-Exempt Inv Muni Natl 1.81 9 1.51 3.23 0.19 -0.02 Vanguard High-Yield Tax-Exempt Inv Muni Natl 1.77 10 1.58 3.24 0.19 0.01 Vanguard CA Interm-Term T-E Inv Muni CA 1.74 31 1.53 2.46 0.19 -0.03 Vanguard Interm-Term Bd Index Inv Corp.-Inv. 1.73 1 1.93 2.27 0.18 -0.01 Vanguard Interm-Term Tax-Exempt Inv Muni Natl 1.58 19 1.23 2.56 0.19 -0.01 Note: The list excludes the same funds with different classes, and institutional funds have been excluded. Funds having minimum initial investment above $5000 have been excluded. Q3 % Rank vs. Objective* equals the percentage the fund falls among its peers. Here, 1 being the best and 99 being the worst. The list of top 15 Vanguard fund performers is dominated by funds belonging to the Municipal bond funds category. Nine of the 15 funds belong to this category. This was expected as many sub-Municipal fund categories, such as Muni California Long, Muni Pennsylvania and Muni New York Long, featured in the top performers list for the third quarter, according to Morningstar data. However, the gains were modest, with Muni California Long performing the best, notching up a 1.7% gain in the quarter. Among the best-performing Vanguard Municipal Bond funds, Vanguard California Long-Term Tax Exempt Fund Investment (MUTF: VCITX ) gained 2.1% and was the best performer. The other funds from this category were Vanguard Massachusetts Tax-Exempt Fund Investment (MUTF: VMATX ), Vanguard Ohio Long Term Tax Exmpt Fund Investment (MUTF: VOHIX ), Vanguard New York Long Term Tax Exempt Fund Invesment (MUTF: VNYTX ), Vanguard Pennsylvania Long Term Tax Exmpt Fund Investment (MUTF: VPAIX ), Vanguard Long Term Tax Exempt Fund Investment (MUTF: VWLTX ), Vanguard High Yield Tax Exempt Fund Investment (MUTF: VWAHX ) and Vanguard California Intermediate Term Tax Exempt Fund Investment (MUTF: VCAIX ). Moreover, all these funds carry a favorable Zacks Mutual Rank. VCITX, VMATX, VOHIX, VNYTX, VPAIX, VWLTX, VWAHX carry Zacks Mutual Fund Rank #1 (Strong Buy) , while VWITX holds a Zacks Mutual Fund Rank #2 (Buy) . However, the best gainer from this list was a Government Bond Fund – Long, Vanguard Long Term Treasury Fund Investment (MUTF: VUSTX ), which added 5.4% in the quarter. Another fund from the category, Vanguard Intermediate Term Treasury Fund Investment (MUTF: VFITX ), was up 2% and was the sixth best gainer. Both VUSTX and VFITX carry a Zacks Mutual Fund Rank #1. Vanguard Long Term Investment Grade Fund Investment (MUTF: VWESX ), also carrying a Strong Buy rank, from the Investment Grade Bond Category, gained 2.6% and was the second best performer. While none of the funds carried an unfavorable Zacks Mutual Fund Rank, Vanguard Long-Term Bond Index Inv (MUTF: VBLTX ), Vanguard REIT Index Inv (MUTF: VGSIX ) and Vanguard Interm-Term Bd Index Inv (MUTF: VBIIX ) currently carry a Zacks Mutual Fund Rank #3 (Hold) . Original Post