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Market wrap May 12, 2017: Cooling U.S. inflation sinks yields, flattens stocks
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By Fund Library News Wire  | Friday, May 12, 2017


By Mike Keerma

* Cooling U.S. inflation sinks yields, flattens stocks.
* Excel debuts asset allocation ETFs.
* RBC launches global real estate ETF.
* Franklin Templeton introduces four ETFs.

* Stocks flat on the week. Softness in financial stocks held Toronto’s S&P/TSX Composite Index down for a hairline -0.3% loss on the week, despite some strength in resources, as crude oil gained 3.1% on the week. Canadian financials continued to feel the ripple effects of the troubles at alternative mortgage lender Home Capital Group Inc. (TSX: HCG), which saw a run on its deposits over the past couple of weeks and sought a $2 billion line of credit from a consortium of lenders to keep the company solvent as it prepares to sell assets. In the U.S., soft retail sales in April (up only 0.4%) and a cooling core inflation rate (1.9% year-over-year in April) helped push Treasury yields lower, as traders downgraded expectations of another two rate hikes by the Federal Reserve Board this year. The S&P 500 Composite Index retreated a relatively modest -0.4% on the week, while the Nasdaq Composite Index gained 0.3%, as investors continued to focus on earnings (still relatively strong in the first quarter) and economic growth.

In other company news, technology firm Apple Inc. (NASDAQ: AAPL), maker of the iconic iPhone and iPad devices became the first U.S. company to exceed US$800 billion in market capitalization, becoming the world’s largest company by market capitalization. A combination of strong earnings growth from a relatively small but highly focused product line and an aggressive share buybuy program has helped keep Apple at the top of the heap. The company represents about a 4% weighting in the blue-chip S&P 500 Composite Index, and if it continues on its growth trend through the rest of the year, its market cap could exceed US$1 trillion later this year.


* Excel debuts asset allocation ETFs. Excel Funds Management Inc. debuted two global asset allocation ETFs, which are expected to commence trading on the TSX on May 17.

Excel Global Balanced Asset Allocation ETF (TSX: EXGB) targets an annual return of 2.5% over the Bank of Canada Overnight Lending Rate over a rolling two to three-year period, while targeting portfolio volatility to a range of 4%-6%.

Excel Global Growth Asset Allocation ETF (TSX: EXGG) aims for an annual return in excess of 5% over the Bank of Canada Overnight Lending Rate over a rolling three to five-year period, while targeting portfolio volatility to a range of 8%-9%

Bhim D. Asdhir, President & CEO of Excel Funds Management Inc., said, “These first-of-a-kind quantitative ETFs in Canada combine behavioural science and big data to facilitate the most effective asset allocation decisions.” According to an Excel release, the managers will use the proprietary mathematical models of London, England based Alken Asset Management to make asset allocation decisions and manage risk.

* RBC launches global real estate ETF. RBC Global Asset Management expanded its ETF lineup with the introduction of the RBC Quant Global Real Estate Leaders ETF (TSX: RGRE). RBC said in a release that the fund uses a rules-based, multi-factor approach to build a portfolio of global real estate investment trusts and real estate operating companies with attractive yields, strong balance sheets, and stable cash flow.

* Franklin Templeton introduces four ETFs. Franklin Templeton Investments Corp. announced plans to launch a suite of two actively managed ETFs and two strategic beta ETFs under its “LibertyShares platform” in the coming weeks

Its first two actively managed ETFs, theFranklin Liberty Risk Managed Canadian Equity ETF and Franklin Liberty Canadian Investment Grade Corporate ETF, are expected to commence trading on the TSX on May 30.

Franklin Templeton also introduced two strategic beta ETFs,Franklin LibertyQT U.S. Equity Index ETF and Franklin LibertyQT International Equity Index ETF, which it expects to commence trading on the TSX on June 5. In a release the firm said the strategic beta ETFs track indices that are grounded in both fundamental and quantitative analysis, using a systematic, rules-based method that applies four custom factor weightings: quality (50%), value (30%), momentum (10%) and low volatility (10%).

Check Fund Library’s Market Activity page regularly for active updates on key market indexes and commodities.

@FundLibrary – Follow Fund Library on Twitter for daily information and updates.


© 2017 by Fund Library. All rights reserved. Reproduction in whole or in part by any means without prior written permission is prohibited.

The foregoing is for general information purposes only and is the opinion of the writer. No guarantee of investment performance is made or implied. It is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice.

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