Investors Unimpressed With Sound of War Drumbeat

 

“Life is like riding a bicycle. To keep your balance you must keep moving.” — Albert Einstein

 

Wall Street seems to be in a bit of a holding pattern, not quite sure which way to go as it ponders how to respond to the possibility of another war, a domestic economy that seems to sputter out with regularity, and the inevitability of a tapering off of the massive bond-buying program that has goosed the equity market to record highs.

True, the key indices all experienced gains last week, and the Dow Jones Industrial Average (DJIA) did manage to snap a negative run of four straight weeks of losses. But the gains were relatively negligible, and hardly seemed in synch with the strong run seen in equities during the heart of the summer.

The DJIA ended the holiday-shortened trading week up by 0.8%, while the benchmark S&P 500 Index (SPX) moved into the black by 1.4%. Meanwhile, the Nasdaq led the pack with a 2% increase over the course of the same period.

Any perception that the U.S. economy is proceeding in anything resembling a robust trajectory succumbed to the reality of the August jobs report, which fell slightly below economists’ projections. While the 7.3 unemployment rate fell close to the expected number, the actual increase in jobs was about 11,000, off by about 5% of expectations.

In regards to Syria, there would seem to be enough of a political stalemate happening on the domestic front to keep the U.S. from making any fast and furious moves. The White House decision to refrain from any military action without Congressional blessing seemed to ease the fears of investors, at least based on the decrease in market volatility compared to the previous week.

Investor fears could ratchet up quickly, of course, should Congress approve targeted military intervention in Syria, or if the White House decides to attack that country without Congressional approval.

For the moment, however, the stalemate remains intact, augmented by Russia’s loud protest of any U.S. military response, Europe’s holding off of any unified support for U.S. action, and the U.N.’s usual muddle of ineffectiveness in reaching any level of consensus.

In any event, Wall Street inches upward, which could be taken as a show of support of non-intervention.

For those who are feeling that there is just too much pressure in the Middle East situation at the moment, a play on oil could be the speculative move of choice.

Should it occur, a sudden escalation in tension in the region will jack up oil prices, though the 10% increase in crude price over the last couple of months might limit the size of such a movement, even amidst an increase of area tension.

Oil does remain a speculative play in the current socio-economic environment. And, for those who prefer to use ETFs for such endeavors, USO (United States Oil Fund) is available for the purpose. It tracks the price of light, sweet crude oil, based on futures contract prices as traded on the New York Mercantile Exchange (NYMEX).

What the Periscope Sees

Each week, the Sabrient SectorCast ETF Rankings rate each of the ten U.S. industrial sector iShares (ETFs) by Sabrient’s proprietary Outlook Score. The Rankings are revised on a weekly basis.

The Rankings for the past week placed the Technology Sector atop the SectorCast rankings, with a very solid score of 91. The Financial Sector, which has secured a solid record of second place finishes over the last several months, finished with an Outlook Score of 72, which also was the score on the week for the Energy Sector.

Here is the current list of some of the top-performing Technology Sector ETFs year-to-date, as of the end of the first week in September:

FDN — First Trust Dow Jones Internet Index Fund, +31.87%

SOXX — iShares PHLX SOX Semiconductor Sector Index Fund, +24.35%

QTEC — First Trust NASDAQ-100 Technology Sector Index Fund, +21.32%

FXL — First Trust Technology AlphaDEX Fund, +21.31%

SMH — Market Vectors Semiconductor ETF, +18.74%

IGV — iShares S&P GSTI Software Index Fund, +17.10%

ETF Periscope

Full disclosure:  The author does not personally hold any of the ETFs mentioned in this week’s “What the Periscope Sees.”

Disclaimer: This newsletter is published solely for informational purposes and is not to be construed as advice or a recommendation to specific individuals. Individuals should take into account their personal financial circumstances in acting on any rankings or stock selections provided by Daniel Sckolnik or Sabrient. Neither Daniel Sckolnik nor Sabrient makes any representations that the techniques used in its rankings or selections will result in or guarantee profits in trading. Trading involves risk, including possible loss of principal and other losses, and past performance is no indication of future results.