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  Passive Investment Vehicles Have Posted The Strongest Asset Growth Since The End Of 2007
Posted Under: Conceptual Investing

View from the Observation Deck  

  1. This marks the seventh calendar year in which we have tracked the asset growth of the four major types of packaged products since the close of 2007 (prior to financial crisis in 2008-2009).
  2. The percentage change in the total assets invested in packaged products from 12/31/07 to 12/31/17 were as follows (chart): Exchange-Traded Funds (ETFs) (+459%); UITs (+60%); Mutual Funds (+56%); and Closed-End Funds (-12%).
  3. From 2016 to 2017, total assets in each of the four major types featured in the chart fluctuated as follows: ETFs ($2.5 trillion vs. $3.4 trillion); UITs ($85 billion vs. $85 billion); Mutual Funds ($16.3 trillion vs. $18.7 trillion); and Closed-End Funds ($262 billion vs. $275 billion).
  4. Last year, investors favored passive investing over active management. Data from Morningstar shows that estimated net flows to all "Active" long term mutual funds and ETFs totaled -$7 billion in 2017, while estimated net flows to all "Passive" funds and ETFs totaled $691.6 billion.
  5. We have noted in previous blog posts that some industry pundits have predicted that ETFs, in time, will supplant mutual funds as the most popular packaged product. We intend to continue monitoring. 

This chart is for illustrative purposes only and not indicative of any actual investment. 

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Posted on Thursday, March 8, 2018 @ 2:20 PM • Post Link Share: 
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  Interest Rates Policy and the Markets
Posted Under: Weekly Market Commentary Video
Bob Carey, Chief Market Strategist at First Trust Advisors L.P., discusses the latest developments in the market and takes a look ahead.
Posted on Tuesday, March 6, 2018 @ 2:52 PM • Post Link Share: 
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  U.S. Crude Oil & Natural Gas Rig Counts
Posted Under: Sectors


View from the Observation Deck  
  1. Since the beginning of 2014, the peak (6/20/14) in the price of crude oil was $107.26 per barrel, while the peak (2/19/14) in the price of natural gas was $6.15 per million British thermal units (BTUs), according to Bloomberg.
  2. As of 3/2/18, the price of a barrel of crude oil stood at $61.25 per barrel, down 42.90% from its peak in 2014, while the price of natural gas stood at $2.70 per million BTUs, down 56.10% from its peak in 2014.
  3. With respect to the period depicted in the charts, the 800 active crude oil rigs registered on 3/2/18 was more than 2.5 times higher than the period low of 316, posted on 5/27/16. The 181 active natural gas rigs registered on 3/2/18 was more than 2.2 times higher than the period low of 81, which was posted on 8/5/16.
  4. Active rig counts are just one barometer investors can use to assess both the crude oil and natural gas markets. U.S. investors should keep in mind that the crude oil market is more global in scope (greater foreign competition), while the natural gas market tends to be more domestic in nature for the U.S., though the U.S. is beginning to export natural gas as well. Robust production has tended to keep natural gas prices fairly range bound over the past couple of years, in our opinion.
  5. While the Organization of Petroleum Exporting Countries (OPEC) continues to curb crude oil production, U.S. producers, particularly in the shale regions, have been increasing production.
  6. The International Energy Agency (IEA) believes that strong economic growth worldwide will continue to support strong crude oil consumption until at least 2023, according to CNBC. The IEA is forecasting that the U.S. will be in a position to export 5 million barrels a day by 2023. In December 2017, the U.S. exported an average of 1.5 million barrels per day, according to the U.S. Energy Information Administration. 
The charts and performance data referenced are for illustrative purposes only and not indicative of any actual investment. There is no guarantee that past trends will continue or projections will be realized. 

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Posted on Tuesday, March 6, 2018 @ 2:17 PM • Post Link Share: 
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  US Stocks Ended March 2, 2018
Posted Under: Weekly Market Commentary

Stocks dropped for the week after President Trump announced new steel and aluminum tariffs, instilling fears of a potential trade war, and Fed Chairman Mr. Powell reiterated to congress a gradual increase in short-term interest rates. Investors worry rising inflation from new tariffs and higher growth from the recent tax cuts could cause the Federal Reserve to move faster on raising short-term interest rates. In economic news, the labor market displayed further signs of tightening with initial jobless claims falling to 210,000, the lowest level since 1969. The industrials and materials sectors were the worst performing sectors as protectionist measures could cause rising input costs. In stock specific news, Berkshire Hathaway Inc. released its investor letter to shareholders. In the letter, Chairman and CEO Warren Buffett stated he does not see any companies worth buying at current valuations, but rather he favors returning capital through share buybacks. Shares of Gap, Inc. jumped after announcing better than expected comparable-store-sales with all three of its flagship brands reporting flat to positive growth for the first time since fiscal first quarter 2013. In contrast, Lowe's Cos Inc. announced disappointing results as weak gross margins drove a material earnings miss. Looking ahead to next week, Friday's unemployment report for February will be the key economic data point. The unemployment rate is expected to drop to 4% from 4.1% and wage growth is expected to come in at 2.8% year-over-year. Last month's strong uptick in wages sparked an increase in volatility and the market correction. Longer term, we continue to view the underlying fundamentals of the economy as the key driver of the stock market. If corporate profits remain strong, like the last two quarters, equities have room to run.
Posted on Monday, March 5, 2018 @ 8:18 AM • Post Link Share: 
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  US Economy and Credit Markets Ended March 2, 2018
Posted Under: Weekly Market Commentary

Investors fled into bonds on Thursday last week, as President Donald Trump announced plans to institute import tariffs on steel and aluminum of 25% and 10% respectively. U.S. Treasurys quickly reversed those gains on Friday as traders and strategists expressed worries about rising prices and inflation. The ISM Manufacturing Index rose to the highest level since 2004, coming in at 60.8 in February, well above the consensus expected 58.7. Generally speaking, levels higher than 50 signal expansion, while levels below 50 signal contraction. Federal Reserve Chairman Jerome Powell spent two days testifying before Congress last week, where he offered an upbeat view of the U.S. economy. In December, Fed officials projected that there would be three interest rate increases in 2018, but Chairman Powell's comments signaled that more hikes may be considered if the economy continued to expand. As a result, markets seem to be pricing in the possibility of four rate hikes in 2018. Major economic reports (related consensus forecasts, prior data) for the upcoming week include: Tuesday: January Final Durable Goods Orders (N/A, -3.7%), Factory Orders (-1.2%, 1.7%); Wednesday: March 2 MBA Mortgage Applications (N/A, 2.7%), February ADP Employment Change (195k, 234k), January Trade Balance (-$55.0b, -$53.1b); Thursday: March 3 Initial Jobless Claims (220k, 210k); Friday: February Change in Nonfarm Payrolls (200k, 200k), February Unemployment Rate (4.0%, 4.1%), January Final Wholesale Inventories MoM (0.7%, 0.7%).
Posted on Monday, March 5, 2018 @ 8:11 AM • Post Link Share: 
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These posts were prepared by First Trust Advisors L. P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
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