A number of market observers, including myself, have stated that ETFs have written a true success story over the last two decades and are set to continue this in the future. Even as this seems to be somewhat intuitive, these statements often miss a rationale why the trend toward ETFs will continue. Within this article, I want to shed a light on changes in consumer behavior as a driver for the growth of ETFs, since the COVID-19 pandemic has changed the behavior and expectations of consumers. Even as I was always positive for the future of ETFs, I think that

As many of our clients will be aware, one of our current global big-picture calls is the fact that asset price bubbles are inflating and will most likely get bigger before eventually bursting. Based on some simple arithmetic and an assumption about the size of the equity risk premium, equities are overvalued by some 40% globally. To gauge which countries are most at risk to a correction, we have run this scenario, with some caveats around it, through our Financial Vulnerability Indicator (FVI), while also contrasting the results with what happened during the dot-com crash in the early 2000s. The

Global equity markets have regained their poise even though trade negotiations between the US and China recently hit a deadlock. Our China Exposure Index weights together US listed-firms that derive a large proportion of their revenue from China and would therefore be most sensitive to retaliatory sanctions in a trade war. On 29 March we highlighted that investors in these firms did not seem to be overly concerned about a deterioration in US–Sino relations — since then, the CEI dropped six points before steadying last week. Refresh the chart in your browser | Edit chart in Datastream The strong dollar and the

Authored by Brenda Zhang. With the explosive growth in passive exchange-traded products (ETPs), constructing appropriate investing strategies in this area is more important now than ever. In recent years, investors’ interest in index mutual funds and ETPs has dramatically increased. The Investment Company Institute reports that between 2007 and 2016, index domestic equity mutual funds and exchange-traded funds (ETFs) received $1.4 trillion in net new cash and reinvested dividends. In contrast, actively managed domestic equity mutual funds experienced a net outflow of $1.1 trillion.[1] StarMine quantitative models have a long and proven track record of being strong predictive tools to

The All Cap Growth style ranks sixth out of the twelve fund styles as detailed in our 4Q17 Style Ratings for ETFs and Mutual Funds report. Last quarter, the All Cap Growth style ranked sixth as well. It gets our Neutral rating, which is based on an aggregation of ratings of 11 ETFs and 478 mutual funds in the All Cap Growth style as of October 17, 2017. See a recap of our 3Q17 Style Ratings here. Figures 1 and 2 show the five best and worst rated ETFs and mutual funds in the style. Not all All Cap Growth

“Reports of my death have been greatly exaggerated” is one of Mark Twain’s more frequently referenced quips. Leaving aside the fact that it is a slight misquotation, it is an amusing line, and one that neatly captures Fathom’s belief in the continued validity of the Phillips curve. There is a widespread perception that the relationship between labour market slack and inflation is, at best, diminished and, at worst, no longer intact. Fathom does not subscribe to this view. Instead, we believe that the impact of changes in unemployment on a worker’s remuneration has been masked by a sustained decline in

The so-called ‘Trump trade’ may have shown a flicker of life following the passing of a 2018 budget blueprint last Thursday, but we do not expect US tax reform to be enacted until Q1 or Q2 next year. Refresh the chart in your browser | Edit chart in Datastream Want more charts and analysis? Access a pre-built library of charts built by FathomConsulting via Datastream Chartbook in Thomson Reuters Eikon. Last Thursday, Republican senators passed a 2018 budget blueprint by a narrow 51 – 49 margin, with Democrats unanimously opposed. Thursday’s vote is one significant hurdle cleared for the administration’s recent tax proposal; the US dollar, Treasury

Fathom’s latest Economic Sentiment Indicators (ESIs) for September show that confidence continues to strengthen across the euro area. On an aggregate level, our euro area ESI rose to an all-time high, surpassing its pre-crisis peak and buoyed by an unusually large jump in the European Commission’s consumer sentiment indicator in September. After consistently underperforming, Italy’s ESI has been volatile in recent months but rose sharply in September, up from 0.9% to 1.2% on the back of Istat’s (Italy’s National Institute of Statistics) economic climate index which climbed almost 15 points in September. This rise in economic sentiment across the currency

Kim Jong-un’s decision to escalate further the geopolitical game of chicken with the US by continuing to lob missiles in the direction of Japan was all too predictable[1] (albeit the timing was uncertain) but that doesn’t make it any less unwelcome. In response, US President Trump strongly criticized North Korea’s actions and warned that “all options are on the table”, which logically includes the possibility of a US military response[2]. Normally, one would consider the military option as having an extremely low delta (ie. probability) with a politically negotiated settlement the more acceptable and hence more likely alternative. However, these are hardly

McDonald’s is going large in China. It will have to ensure that breakneck growth does not bring indigestion.On Tuesday, the $126 billion burger giant said it planned to open 2,000 mainland stores by 2022. That will nearly double its footprint from 2,500 outlets now. That target is up one-third from a previous goal of 1,500 restaurants in five years, a goal that also originally included Hong Kong.This underlines how the $2.1 billion sale of McDonald’s China business, which was agreed in January and closed last week, was not really a retreat. It now holds one-fifth of the business, which has

A general theme in our Market Insights over the past several weeks has been one of quiet confidence that the rally in global risk assets would continue, notwithstanding the very obvious escalation of geopolitical risks centred on, but certainly not limited to, North Korea[1] and the equally obvious overvalued nature of key equity indices[2], especially in the tech sector[3]. This perspective was informed by the subdued nature of crowd sentiment towards global equities, reinforced by a global macroeconomic picture that was widely perceived as benign. (In early June[4] we labelled this the Goldilocks scenario: economic growth was viewed by the crowd as

A decline in the ratio of world trade over world GDP, alongside the electoral success of isolationist politics in 2016, spurred talk about the ‘end of globalisation’.  However, aided by a rebound in emerging markets (EMs), world trade growth has actually picked up in 2017. The weakness in EM trade since 2013 has partly reflected soft economic activity among commodity exporters. We think that cycle is now turning.  With little desire in emerging markets for increased protectionism, and supportive demand from China, EMs will provide a tailwind to world trade this year and next. In the near term, there are