Harvest ETFs Monthly Insights (July 2024 Summary)
Harvest ETFs
Consistent monthly income and growth-focused investment solutions designed for Canadian investors.
Macro Snapshot: Sector Rotations, Tech’s Leadership Challenged, and US Election Myths
For the month of July, the Tech sector saw some profit taking following the previous six months in which large and-mega-cap technology equities have powered market for 2024. ?Overall, the market growth so far this year can be characterised by profit taking and rotations into other sectors from Tech. This is borne out in the S&P Equal Weight compared to the S&P Cap Weighted.
Further evidence of sector rotations driving performance in July were captured by a some of our product lineup. The Harvest Equal Weight Global Utilities Income ETF (HUTL:TSX), Harvest Global REIT Leaders Income ETF (HGR:TSX), and the Harvest US Bank Leaders Income ETF (HUBL:TSX) were all up over the past month..
The Healthcare sector also benefited from the sectoral rotation with strong performance on the month. Rotation was also seen across the sub-sectors as some stocks with strong momentum dropped in favour of other styles, such as value stocks. For example, the Harvest Healthcare Leaders Income ETF (HHL:TSX) had two holdings? for which this played out, namely Eli Lilly And Co. and Bristol-Myers Squibb Co. ?Our preferred GLP-1 weight loss position in Eli Lilly pulled back while value play Bristol Myers was up significantly month over month. Other sectors demonstrated similar trends with momentum stocks pulling back and other styles such as value stocks and areas that benefit from lower interest rates, moving higher on the month.
The explosive growth in Technology powered by the Magnificent 7 and other top tech names since the beginning of 2023 has been the main driving force for the market’s growth. Without the Mag 7, the rest of the market looks pedestrian when it comes to earnings growth.
Harvest Tech Achievers Growth & Income ETF (HTA:TSX) has benefited from the superior performance of tech stocks returning ?26% year-over-year and posting a 9.04% current yield at the time of this writing. In July, HTA along with the broader tech space pulled back due to some profit taking and rotation into other sectors. Despite the pullback, we still see strong earnings growth for the sector, albeit at a lower rate than what we had seen coming into 2023.
For July, the major economic indicators relating employment, manufacturing, sentiment, and inflation showed no change in the trajectory over the past month. There are still signs of moderation and slowing economic data. The market in general has seen this “bad news as good news” as it awaits a firm validation of the transition into an interest rate easing environment in the United States. There has been some volatility more recently triggered by the concerns that the Fed in the US has been too slow to cut interest rates.? In July, the yield curve started to normalize with shorter term rates coming down more than the longer-term rates. At the time of writing, which is in August, we saw a continuation of this normalization.
On the political front, the candidates for the 2024 US Presidential Election are now set in stone. With this comes the usual speculation over what impact the election could have on the US markets. So once more this caused us to look back at S&P 500 returns in the past eight election cycles. Historically, there are very few patterns for the broader markets performing a particular way at any specific period coming into an election. This trend has held true no matter what party is triumphant.
What is remarkable is that after a US Presidential election, markets have had positive returns seven out of eight times. We take the view that this is, in part, due to the fact it is a longer period and less to do with the actual election results. In a similar vein, there does not appear to be any pattern that election cycles drive more volatility. The historical viewpoint shows that volatility tends to increase from the summer months into the fall.
In sum, we hold the view that diversification is essential in this market environment. After all, it is best not to overcomplicate trading around an election cycle. Instead, the focus should remain on the fundamentals and the long term.
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Please see the table of cash distributions for our equity-income and enhanced equity-income ETFs for the month ended July 31, 2024. Click here to view the full press release.
ABOUT HARVEST ETFS:
Founded in 2009, Harvest Portfolios Group Inc. is an independent Canadian Investment Fund Manager. At Harvest, our guiding principles are premised on building wealth for our clients through ownership of strong businesses that have the potential to grow & generate income over the long term. Harvest has an established track record with its stable of Equity ETFs and Fixed Income ETFs. Now, in 2024, Harvest has expanded its income philosophy to introduce Balanced Income ETFs to our innovative lineup. These portfolios are invested in ETFs listed on a recognized North American stock exchange that provide exposure towards large capitalization equity securities, investment grade bonds or money market instruments issued by corporations or governments and will include ETFs that engage in covered call strategies. Read More
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For information purposes only and does not constitute an offer to sell or a solicitation to buy the securities referred to herein or used to engage in personal investment strategies. Please consult your investment advisor.
Certain statements in this document are forward looking. Forward-looking statements (“FLS”) are statements that are predictive in nature and depend upon or refer to future events or conditions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. Unless required by applicable law, Harvest Portfolios Group Inc. does not undertake, and specifically disclaim, any intention or obligation to update or revise any FLS, whether as a result of new information, future events or otherwise.
Commissions, management fees and expenses all may be associated with investing in Harvest Exchange Traded Funds (managed by Harvest Portfolios Group Inc.). Please read the relevant prospectus before investing. The indicated rates of return are the historical annual compounded total returns (except for figures of one year or less, which are simple total returns) including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. The funds are not guaranteed, their values change frequently and past performance may not be repeated. Tax, investment and all other decisions should be made with guidance from a qualified professional.