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Stocks rise after Fed expands stimulus

Stocks erased earlier losses and rose Monday, after the Federal Reserve said it would begin purchasing individual corporate bonds as part of its emergency lending program to inject liquidity into the virus-stricken economy.

[Click here to read what’s moving markets heading into Tuesday, June 16]

Earlier in the session, the Dow was off as many as 762 points, or 3%, as investor jitters over rising coronavirus cases in key parts of the country stirred up an extension of last week’s pullback in equities.

Last week, stocks posted their first weekly loss in a month, with a steep selloff on Thursday comprising much of the weekly decline. The plunge, which came on the heels of a more than 40% run-up in the S&P 500 since March, came after new data showed rising coronavirus case and hospitalization counts in states that were among the first to reopen businesses, and after the Federal

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Cyclical Stocks Have Led Market Recoveries

Key insights

  • If economically sensitive stocks lead the market recovery, as we expect, history would repeat itself.
  • Many cyclical companies, such as global industrial conglomerates, capital-rich banking institutions, and travel & leisure companies, should experience a substantial rerating.
  • With over 50% of the ACWI index invested in the lowest Covid-19 beta sectors, passive index investors appear to be underexposed to upside recovery.

“People should value manufacturing–the world of atoms vs. the world of bits–far more. It is looked down upon by many, which is just not right.” -Elon Musk

Although less controversial than some of Mr. Musk’s recent tweets, markets appear to disagree with his tribute to the physical over the digital. This year-to-date’s sector winner in the MSCI ACWI Index (“ACWI”) is information technology, with software & services devouring the world of atoms. In the volatile first five months of 2020, these companies trafficking in bits rose nearly 10%,

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Top-Ranked Technology ETFs Soaring to All-Time Highs

The technology sector is booming and at the heart of the current market rally. It has shown strong resilience in one of the worst economic environments that the United States has ever seen.

Most of the strength is being driven by the biggest names in the sector like Facebook FB, Apple AAPL, Amazon AMZN and Microsoft MSFT thanks to the shift in consumer habits to a purely digital world with work, entertainment and shopping from home. In fact, the combined market value of the four companies is now close to $5 trillion, with Apple claiming the top spot at nearly $1.5 trillion. Only Facebook out of the four has a market cap below $1 trillion (read: Take a Bite of the Red-Hot Apple Stock With These Tech ETFs).

These big tech stocks propelled the broader stock market, especially the tech-heavy Nasdaq Composite Index, which has crossed the 10,000 milestone for

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Understanding Smart Beta ETFs’ Indexes

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Smart beta ETFs make up a small, but growing, slice of the top three index providers’ business, based on ETF assets.

At First Bridge Data, a CFRA company, index-based ETFs are split between traditional beta funds that track a market-cap-weighted index; smart beta funds that track an alternatively weighted index; and leveraged/inverse ETFs that either amplify or seek to benefit from the decline in the returns of market-cap-weighted indexes.

Smart beta funds have gained in popularity in recent years, as investors have sought to improve on the reward or reduce the risk of traditional beta funds without employing leverage. Some smart beta types include dividend, low volatility, value and multifactor; the latter combines multiple metrics in one index-based approach.

Yet smart beta remains a modest percentage of ETF assets tied to indexes from the top three index providers as demand for lower-cost traditional beta funds has been even stronger.

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