Dollar-Weighted Category Return

    This week brought further downside and volatility to the market, with only 8 of 26 categories positive and an average week category return of -1%. 

    Of those 8 categories that ended the week up, only utilities, Europe, commodities, and short funds were up over 1%. 

    Of the 18 categories that ended the week down, 15 were down over -1%, 8 were down over -2%, and 3 were down over -3%.  The worst performers were infrastructure, transports, energy, and China.

    At this point, only the currency, commodity, and short categories are currently up over the past trading month. 

    Year-to-date, large- and mid-cap categories have only marginally positive adjusted close returns, with small-caps already sliding beneath par. 

Dollar-Weighted Category Return

Dollar-Weighted Category Performance

    On the week's dollar-weighted performance, only 2 of 26 categories ended the week black - short funds and China funds, returning a respective 2.87% and 1%.  Another 3 categories ended the week only marginally red, falling at most 0.36% percent - currency funds, Japan funds, and broad Asia funds.

    The remaining 21 categories were down at least 1% (call/write) and, at worst, nearly 7% (infrastructure).  Of these categories, the average return was nearly 3% down.

    With the week at last done, there still does not seem to be a single non-psychological motivator for the broad market losses.  Both gold and oil ended the week down, but stock and bond market returns do not seem to match what we would expect in such a week. 

    One possibility I offer as a suggestion is that foreign investors, having enjoyed the past two months, view the current dollar strength as a local maximum.  The US Dollar Index, having dropped throughout the market rally, is believed by most to continue to decline in the medium-term.  Given this, then regardless of their investment type, the current dollar high would provide them the best return after conversion to their home currency, thus explaining an otherwise unexplainable lack of historical correlation between asset classes.

Dollar-Weighted Category Return

    21 of 26 categories ended Tuesday down, with the average category trading down -0.40% with an average dollar flow out of 3 million.  The worst outflow was in small caps with 33 million red, followed by real estate, utilities, and large caps.  The only two categories that saw non-negligible dollar inflows were short funds and China, despite the volatilitly that Chinese markets have experienced this week. 

    It's interesting to note which categories have had the lowest correlations to the SPY in the last week.  Those with negative correlations are convertible funds, China funds, and currency funds.  Low but positive categories include Japan funds, commodities and resources funds, call-write funds, and broad Asia funds.  Asian markets have remained strong despite high volatility and dramatic swings, ignoring changes in the bond and currency markets that could point to troubling costs and inflation in the coming cycle.

NB: The original market cap values were very wrong, thanks to order of magnitude errors in E*Trade's data.  Thanks to Steven Towns for the corrections.

    As I recently covered various fundamentals of broad and country-specific Asian ETFs for more aggressive portfolios, I was interested in summarizing a more conservative income sector like utilities.

    Here is the data table, sorted by expense. Note that Cap is shown here in dollars, not thousands of dollars, and that Month Traded is shown in millions of dollars.

    It looks like there is no easy answer in this sector, but there are a number of advantages held by some funds.

1. The Select SPDR XLU is by far the most dollar liquid utility ETF, followed by the Utility Holders UTH.  Investors looking to take very large positions that require stops should almost certainly pick one of these two funds.
2. The largest fund is by far the iShares DJ Utility Index tracker IDU, followed by the S&P Global Utilities JXI and the PowerShares Progressive Energy PUW. 
3. PRFU, the FTSE RAFI Utility tracker, has quite a high expense ratio for just an index tracker in this sector.  It's competitors at equivalent expense ratios are either actively managed or hold more uncommon assets like water or progressive energy.
4. VPU and IDU have the best Yield minus Expense for those looking for income in their holdings.
5. Of the index funds, the Rydex equal-weight seems to have the best diversification at its given expense cost, having only 25% of its holdings in its 10 ten assets (since it is equal-weighted).  As equal-weight funds become more popular, it'll be interesting to see how they perform in more bearish markets.