With Tuesday’s (4/13) trading action, the Invesco QQQ Trust QQQ rallied to a new all-time high at $340, breaking a double top and returning the chart to a buy signal. Along with the Q’s, there were a few stocks that bettered or match their all-time highs. NVIDIA NVDA, Starbucks SBUX, and Monster Energy MNST were each able to make new all-time highs during Tuesday’s action, while Keurig Dr. Pepper KDP was able to match and Microsoft MSFT better its all-time high from the previous day.

With only a few stocks moving to new highs in tandem with the Q’s, we wanted to look to see what stocks were contributing to the rally within the Nasdaq 100 and the Q’s the most. Looking at Bloomberg data since the beginning of the second quarter, and we see some familiar names are leading the charge. In the table below we have the top 20 stocks that have contributed to the performance of the QQQ since the beginning of Q2. Microsoft MSFT, Apple AAPL, and Amazon AMZN have been the top contributors to the performance of the ETF. Furthermore, 14 out of the 20 are high attribute names (above 3), while five of the 20 are low attribute names (2 or below). In many cases, the low attribute names contributing to performance are stocks that are rebounding or are stocks that have trended positively but have lagged on a relative basis.

• Blackrock rolls out two low carbon ETFs.
  • The BlackRock World ex U.S. Carbon Transition Readiness ETF (LCTD) is an actively managed ETF that looks to invest in companies outside of the US that are likely to benefit from the transition to a  low-carbon economy.
  • The BlackRock U.S. Carbon Transition Readiness ETF (LTCU) is an actively managed ETF that invests in companies that are likely to benefit from the transition to a low-carbon economy.
  • LTCU has an expense ratio of 0.30% while LTCD has a 0.35% expense ratio.

• State Street releases an emerging market debt ETF.
  • The SPDR Bloomberg Barclays Emerging Markets USD Bond ETF (EMHC) tracks the Bloomberg Barclays Emerging USD Bond Core Index.
  • EMHC carries an expense ratio of 0.23%.

• Vanguard debuts an “Ultra Short” bond fund.
  • The Vanguard Ultra-Short Bond ETF (VUSB) is an actively managed ETF that focuses on securities with two years or less to maturity.
  • VUSB carries an expense ratio of 0.10%.

(Source: etf.com)

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Thursday, April 29, 2021, 12 - 4 PM ET via Zoom

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**CIMA®, CPWA®, RMA℠ certifications: This program has been approved for up to 4 hours of CE credit. A benefit to attending the Spring Virtual Symposium is that CE credit hours will be automatically reported on your behalf and reflected in your online account approximately two weeks after the event.

While the first quarter of 2021 was not particularly volatile, especially when compared with the prior year, there was quite a bit of shuffling nonetheless. After leading the DALI domestic equity sector rankings almost continuously for three-plus years (except for a few short weeks in June ’20 when it fell to second) technology ceded its leadership and fell to fifth. Meanwhile, financials and energy climbed from near the bottom of the rankings all the way to their current positions in the top three. After underperforming for much the last several years, value came back into favor, significantly outperforming growth in both the large and small cap categories. After steadily rising in 4Q20, US Treasury yields accelerated dramatically. The US Treasury 10-year Yield Index TNX topped out at 1.75% after starting the quarter at under 1%, resulting in large declines for long-duration bonds, which had been among the best fixed income performers in 2020.

The shifting market landscape of the first quarter offered an opportunity for active managers to outperform their passive benchmarks. For example, large cap equity managers could have gained an advantage over the S&P 500 SPX by underweighting technology, the largest sector in the index by weight, and overweighting areas like financials and energy, while active fixed managers would have benefited from reducing the duration of their portfolios to reduce the impact of rising rates.

Of course, just because there was an opportunity for outperformance does not mean that managers were able to capitalize on it. Moreover, outperformance (or lack thereof) by active managers in one market does not mean that active management outperformed across the board. As we have discussed previously, the key determinate of which is superior, active or passive, is the level of market efficiency. The level of efficiency varies across markets, so when comparing passive vs. active management we need to do so on a market-by-market basis. Today, we’ll take a look at the performance rankings of several passive benchmarks to see how active management fared in the first quarter of 2020; if the passive benchmark ranked in the bottom two quartiles (below the 50th percentile) then a majority of the active managers in that market were able to outperform. Conversely, if the benchmark was below the 50th percentile, then most active managers in the space underperformed. Today we are looking only at how active management fared during the last quarter, so if you would like to see how it’s done over longer time periods, you can find that information in this piece from last year that examined rolling five-year rankings.

Large Cap Domestic Equity

The S&P 500 generated a total return of just under 6.2% in 1Q21, however, the index finished in the third quartile of the eVestment US large cap equity universe. This may be one of the more surprising results - over the past several years domestic large cap equity has been one of the most difficult markets for active managers. In our longer-term piece last year, which looked at rolling-five year returns, there was not a single period in which the S&P 500 finished below the 50th percentile. While one quarter's results are certainly not enough to say that active is back in favor in large cap, the fact that most active managers were able to outperform the benchmark in a quarter with generally strong returns, may mean that active management still has something to offer in the large cap space, which has seen large asset flows into passive strategies. 

Small Cap Domestic Equity

The Russell 2000 also delivered strong absolute numbers in the third quarter and finished below the 50th percentile. This is perhaps less surprising than the result in large cap as small cap has generally been more favorable to active managers over the long-term. 

International Developed Equity

Developed international managers also generally outperformed their benchmark as the MSCI EAFE Index finished in the third quartile. As with small cap equity, this is mostly in line with what we've seen over the longer-term as the passive index has often finished at or below the halfway mark. 

Emerging Market Equity

Except for a lower absolute performance number the emerging market chart looks much like the developed international as the MSCI Emerging Markets also finished in the third quartile. This is also in line with the general longer-term trend 

Domestic Fixed Income

The Bloomberg Barclays US Aggregate was down nearly -3.4% in Q1 and finished in the third quartile of the eVestment Core Fixed Income Universe. The surprise here may be that the index didn't rank lower as it has quite often been in the bottom quartile over longer periods. One possibility may be that active managers were caught off guard by the velocity of rising yields during the quarter. 

POWRSHARES Change
There is a change to the Invesco Commodity Model POWRSHARES this week: buy the Invesco DB Base Metals Fund DBB and sell the Invesco DB Energy Fund DBE. DBE was removed because its rank in the model’s relative strength matrix fell below the threshold to remain a holding in the portfolio. In place of DBE, the model added DBB as it was the highest-ranking fund in the matrix that was not already a holding in the model. This is the second change to the model this year... (Read more)

First Trust: Q1 Overview
And just like that, the first quarter of 2021 is in the books. With that said, we wanted to take this time to review the performance and activity of the First Trust ETF Models over the last quarter. First Trust Focus 5 Model FTRUST5: The equity market finished the first quarter on a positive note with the S&P 500 SPX rallying nearly 6% while the First Trust Focus 5 Model was up nearly 10% for the quarter. We have seen some notable rotation occurring among the sector rankings recently, which has caused some changes to the Focus 5 Model this year.  Earlier in the year (January)... (Read more)

KraneShares: Quarterly Performance Review 
This week will cover our quarterly review for the KraneShares Dynamic China Rotation Model after the first three months of 2021. The model posted a return of -1.83% in the first quarter, underperforming the benchmark FXI.TR, which gained 0.50%. However, the mode continues to outpace the benchmark over a trailing 12-month timeframe, at a gain of 55.41% compared to 27.21%. There were two changes to the model in the first three months of the year, with the KraneShares CSI China Internet ETF KWEB being purchased on January 11 and then sold on March 29. The model begins Q2 with six of the equity-focused funds included as model holdings... (Read more)

Daily Option Ideas for April 13, 2021