There are no changes to any of the iShares models this week. We wanted to take this opportunity to alert you to some upcoming changes to the iShares models lineup and the weekly iShares reports.  First, the iShares Alternative Report and iShares Equity Report will be consolidated into a single, all-encompassing iShares report, the “iShares ETF Report”. Additionally, the models will be streamlined and reduced to four models that can be seen as the essential portfolio building blocks. The inventories of the remaining models are currently going through an evaluation to determine if there are ways to expand coverage within the model’s asset class. The models that will remain are:

• The iShares Fixed Income Model ISHRFIXED;
• The iShares Sector Rotation Model ISHRSECT;
• The iShares International Model ISHRINTL; and
• The iShares Tactical Model ISHRTACTICAL.

The models that will no longer be available are:

• The iShares Alternatives Model ISHRALT;
• The iShares Developed Market Model ISHRDEV;
• The iShares Emerging Market Model ISHREMERG;
• The iShares Income Model ISHRINCOME;
• The iShares Sector Six Model ISHRSECT6; and
• The iShares Smart Beta Model ISHRSMART.

Floating Rate is currently the highest ranked fixed income group in the Asset Class Group Scores system, with an average group score of 3.55. Since the beginning of 2018, we have seen generally higher rates in most areas of the fixed income market. While rising rates are generally a headwind for fixed income returns, floating securities tend to benefit from rising interest rates. As the name implies, floating rate securities do not have a fixed coupon rate; instead, the rate is typically set at a predetermined spread to a reference rate (e.g. LIBOR + 200 basis points) and resets at a fixed interval. Because the next coupon reset is never too far off, the price of a floating rate security will not move significantly due to changes in interest rates and when there are small changes, the price should return to par value at the next reset date. This is obviously advantageous in a rising-rate environment, as floaters will not experience significant price decline like fixed-rate securities – making them a useful addition to a fixed income portfolio.

If you have clients who could benefit from the addition of an allocation to floating rate securities, you may wish to consider the iShares Floating Rate Note ETF FLOT. FLOT is currently the highest ranked floating rate ETF with a fund score of 3.29 and positive score direction of 1.73. FLOT currently offers a 1.6% yield.

This section of the report categorizes select iShares Fixed Income and Currency ETPs by their respective fund groups. Along with each group, you can view the Average Group Score, which is an average of the scores of all funds represented in that particular group. Those iShares ETFs that meet or exceed the Average Group Score will be highlighted in green in order to easily view those ETFs that have superior strength within their respective group. You want to focus on those ETFs that exhibit superior strength when looking to add new exposure to a particular group.

The DWA Matrix uses a Point & Figure relative strength comparison of each index to one another to identify the strongest and the weakest among the universe used. The ETFs with the most relative strength buy signals (suggesting outperformance) versus the others in the group are listed at the top. These ETFs should be overweighted in the portfolio. Those ETFs with the least amount of relative strength buy signals versus the others in the group are listed at the bottom. These ETFs should be underweighted in the portfolio.

Weekly Updates: There are no changes to any of the iShares models this week.