Investors focused on U.S. Treasury yields last week as the 10-year caused the stock market to whipsaw.
With growing concerns about the economy and an increasing sense that the Fed might be done hiking rates, investors purchased bonds and locked-in yields. This pushed the 10-year yield down to its lowest level since the summer. However, the anticipation of a pause in interest rate hikes allowed for high growth stocks to drive the markets higher. Data supported a softening economy. The latest JOLTS report showed job openings sliding to 8.36 million. However other data pointed to a stronger economy. The latest PMI Report clocked in 52.7, beating estimates and previous lower readings. At the same time, the economy added a net 199,000 jobs in November, once again beating estimates and previous additions. All of this mixed data continued to support a confusing trading environment.
Next week will be a busy one as a wide range of inflationary data will be presented as well as the latest interest rate decision from the Fed. Inflation dropped to 3.2% in October on falling gasoline prices and a softer pace for food. On Tuesday, analysts expect the trend to continue, with headline inflation dipping to 3.1% for November. Likewise, on Wednesday, the measure of producer inflation (PPI) is expected to increase by 0.1% after its quick bout of deflation. All of this will come into play as the latest Fed interest rate decision will be announced later on Wednesday. Analysts expect the Fed to pause once again and keep benchmark rates at 5.5%. However, the Fed has continued to support the idea that more hikes could be necessary if inflation suddenly spikes. Additionally, consumer data will be released with the latest retail sales report on Thursday. Retail sales are expected to decline by 0.1% in November, which could indicate a problem for the consumer-driven economy. However, the data only includes about two weeks’ worth of the critical holiday season. Nonetheless, the Fed will be watching that data closely as well.
Given this economic backdrop, let us see how this impacts the performance of various investment strategies.
Investment Strategy Scorecard
Overall, the U.S. stock markets continued their upward trajectory for the rolling month.
Growth focussed strategies including cannabis, technology and long duration bonds posted some of the strongest performances over the rolling month. Meanwhile, commodity and Chinese equity strategies continued to struggle.
U.S Equity Strategies
Several growth strategies continued to post positive performances over the trailing month.
Winning
- Morgan Stanley Institutional Fund, Inc. Growth Portfolio (MSEGX) , up 13.25%
- Spyglass Growth Fund (SPYGX), up 12.72%
- First Trust US Equity Opportunities ETF (FPX) , up 9.18%
- iShares Micro-Cap ETF (IWC), up 8.64%
- iShares Core S&P U.S. Growth ETF (IUSG) , up 3.33%
- Franklin LibertyQ U.S. Equity ETF (FLQL), up 3.21%
Losing
Dividend Strategies
Several dividend strategies, including large cap, mid/small cap and high dividend, posted positive performances over the rolling month.
Winning
- Invesco S&P Ultra Dividend Revenue ETF (RDIV) , up 10.06%
- Principal Small-MidCap Dividend Income Fund (PMDIX), up 6.82%
- ProShares Russell 2000 Dividend Growers ETF (SMDV) , up 6.81%
- Sterling Capital Equity Income Fund (BEGIX), up 6.75%
- WisdomTree U.S. High Dividend Fund (DHS) , up 3.19%
- iShares Core High Dividend ETF (HDV), up 3.1%
- Matthews Asia Dividend Fund (MIPIX) , up 1.48%
Losing
- Pioneer Equity Income Fund (PEQIX), down -10.66%
U.S. Fixed Income Strategies
In US fixed income, long duration bond focused strategies posted solid performances over the rolling month.
Winning
- Vanguard Extended Duration Treasury Index Fund (VEDIX) , up 13.77%
- PIMCO StocksPLUS® Long Duration Fund (PSLDX), up 11.8%
- iShares 20+ Year Treasury Bond ETF (TLT) , up 8.87%
- SPDR® Portfolio Long Term Corporate Bond ETF (SPLB), up 8.73%
Losing
- iShares Floating Rate Bond ETF (FLOT) , down -2.53%
- T. Rowe Price Limited Duration Inflation Focused Bond Fund (TRBFX), down -2.74%
- T. Rowe Price U.S. Limited Duration TIPS Index Fund (TLDTX) , down -3.23%
- ProShares Short 20+ Year Treasury (TBF), down -8.16%
Foreign Equity Strategies
Emerging markets, Swedish and German equity strategies outperformed Chinese equity strategies.
Winning
- iShares MSCI Sweden ETF (EWD) , up 13.45%
- Grandeur Peak International Stalwarts Fund (GISOX), up 11.51%
- iShares MSCI Germany ETF (EWG) , up 10.49%
- Fidelity® International Small Cap Opportunities Fund (FIQJX), up 8.88%
Losing
- Matthews Pacific Tiger Fund (MAPTX) , down -2.91%
- Fidelity® China Region Fund (FHKCX), down -4.38%
- KraneShares Bosera MSCI China A ETF (KBA) , down -6.5%
- WisdomTree China ex-State-Owned Enterprises Fund (CXSE), down -8.22%
Foreign Fixed Income Strategies
Emerging market bond and international treasury strategies continued to post some of the best performances in the foreign fixed income space.
Winning
- iShares International Treasury Bond ETF (IGOV) , up 5.09%
- iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB), up 4.96%
- TCW Emerging Markets Income Fund (TGEIX) , up 4.87%
- John Hancock Funds Emerging Markets Debt Fund (JEMIX), up 4.68%
- SPDR® Bloomberg Barclays Emerging Markets Local Bond ETF (EBND) , up 2.53%
- Eaton Vance Emerging Markets Local Income Fund (EEIIX), up 2.07%
- VanEck J.P. Morgan EM Local Currency Bond ETF (EMLC) , up 1.64%
- Eaton Vance Emerging Markets Debt Opportunities Fund (EIDOX), up 0.81%
Alternatives
Among alternatives,cannabis and gold strategies emerged as winners over the rolling month, while commodities continued to struggle.
Winning
- ETFMG Alternative Harvest ETF (MJ) , up 10.23%
- iShares Currency Hedged MSCI Eurozone ETF (HEZU), up 7.78%
- Fidelity® Select Gold Portfolio (FSAGX) , up 6.06%
- Janus Henderson Contrarian Fund (JCNCX), up 5.89%
Losing
- PIMCO CommoditiesPLUS® Strategy Fund (PCLAX) , down -5.21%
- iShares GSCI Commodity Dynamic Roll Strategy ETF (COMT), down -5.81%
- iShares S&P GSCI Commodity-Indexed Trust (GSG) , down -6.79%
- Fidelity® Series Commodity Strategy Fund (FCSSX), down -6.96%
Sectors
Among the sectors, cannabis, technology and regional banking strategies posted strong results, while energy and real estate strategies struggled.
Winning
- AdvisorShares Pure US Cannabis ETF (MSOS) , up 26.92%
- ARK Fintech Innovation ETF (ARKF), up 20.33%
- American Beacon ARK Transformational Innovation Fund (ADNYX) , up 17.4%
- John Hancock Regional Bank Fund (FRBAX), up 10.77%
Losing
- Fidelity® Select Energy Portfolio (FSENX) , down -4.41%
- Delaware Ivy Science and Technology Fund (WSTAX), down -6.69%
- Aberdeen Standard Physical Palladium Shares ETF (PALL) , down -10.15%
- iShares Mortgage Real Estate Capped ETF (REM), down -33.33%
Methodology
Every week, MutualFunds.com provides a snapshot of the performance of some key mutual funds and ETFs to highlight the trending investment strategies across different sectors, geographic regions, asset classes and themes. MutualFunds.com uses a proprietary system to scan through thousands of relevant mutual funds and ETFs. Fund performance data is calculated for the trailing one month, based on the change in NAV.
Here is a summary of the different strategies covered in this article:
- U.S. equity strategies typically cover different equity investing styles (growth/value/blend) and market capitalizations (small/mid/large).
- Dividend strategies focus on generating income via different equity routes (high yield/dividend growth/foreign dividend/quality dividend)
- U.S. fixed income strategies focus on debt securities issued by U.S. entities and can cover different types of debt (corporate/municipal/high-yield/investment-grade/government/asset-backed) and maturity profiles (short/medium/long).
- Foreign equity strategies cover equity strategies applied to non-U.S. markets based on the level of economic growth (emerging/developed), regions (Asia/Europe/Africa), and market capitalizations (small/mid/large).
- Foreign fixed-income strategies focus on debt securities issued outside the U.S. markets and can cover different regions (Asia/Europe/Africa) and regions based on the level of economic development (emerging/developed).
- Alternative strategies cover non-traditional investments (currencies, hedge funds strategies, derivatives, volatility-based), real estate, and commodities.
- Sector strategies cover dedicated exposure to various sectors of the U.S. economy including technology, healthcare, financial, and industrial among others.