Omicron or not …

Uncertainty … markets hate uncertainty …

And yet that’s exactly what we got in recent days, courtesy of that South Africain strain of Covid-19 by now labelled “Omicron”.

So, bit spike in volatility last Friday, some calm Monday, renewed freak-out Tuesday, and … some reprieve Wednesday.

More of the same is likely underway, until such a time as everyone has had a chance to review what could be reported within weeks, respectively whether Omicron is going to be a real problem, or not. Of course, yesterday … was it yesterday? the CEO of Moderna got markets freaking out as he suggested that the scientists he is talking to were of the view that it was going to turn out to be a bigger problem than anyone might like …

Fasten your seatbelts, as they say …

Anyways, in terms of November flows and performance, looking at Vanguard Canada ETFs, here are some highlights, from my perspective:

  • Aggregate AUM for Vanguard sits (as at 30/11) at levels 54.2% higher than 12 months ago.
  • Asset Allocation ETFs (one ticket solution) were the fastest growing category (up 95.4% y/o/y, followed by equities ETFs, up 58.4%; and finally Bond ETFs, up 17.4% in terms of AUM growth
  • The top 3 Asset Allocation ETFs are all significantly tilted toward equities and growth (VGRO being the largest, followed by VBAL; and VEQT
  • Vanguard is estimated to have enjoyed $850M of net inflows in November, to which a marginal net positive of some $50M of market performance in the aggregate added, to arrive at a +$900M in terms of m/o/m AUM change
  • the fastest growing category – the asset allocation ETFs – contributed 27.9% to total net creates
  • modest outflows were seen in the bond, min vol; and Developed ex US categories
  • top beneficiaries of inflows were: VFV; VEQT; VIU; VGRO; VUN; and VDY; VCN
  • on a trailing 52 weeks basis, net creates are estimated to have totalled $11.98 Billion, or 72.9% of a total AUM increase of $16.45 Billion

Performance-wise:

November 2021 – top and bottom 10 performing ETFs:

noteworthy?

  • While US equities look to have produced positive TR in November (VFV; VGG; VUN) above – it is all a function of the fact that the US Dollar gained some 3.2% during November against the CAD. Without it, US markets returns were negative for November, as reflected in the performance of the corresponding ETFs featuring a CAD hedge
  • YTD “winners” Canadian Dividend and Real Estate ETFs were bottom performers for the month – a reflection of the twin negatives of a FED now speaking earlier taper, respectively concerns over growth in a Omicron bad case scenario (?)
  • Given concerns regarding Omicron only surfaced toward very late in November, there is plenty of time for the remainder of 2021 to prove “challenging” … unfortunately

Year-to-date – top and bottom 10 performing ETFs:

Noteworthy?

  • Canadian equities outperformed US equities last month, as well, they are ahead YTD. This could change, should Omicron turn out to be more negative than recent news suggests (including expectations a tweaked vaccine could be developed within 90-100 days, respectively news out of SA suggesting no notable spike in death had transpired thus far)
  • Bonds, despite a late November “flight to safety” boost, remain in TR negative territory YTD. Should Omicron turn out to be a more formidable adversary than the Delta variants … December could produce gains in the category that would – presumably – help offset any additional downside sustained on the equities side of the ledger
  • YTD TR for EM are basically a big fat zero. It could turn out to be one of these meaningful entry points, as opposed to a reason to worry (about these markets being possibly more at risk of COVID-19 headwinds, given a less “vaccinated” population). While it may currently be counter-intuitive, should a risk-off environment persist into the new year, EM could conceivably benefit, if for no other reason than on full re-opening, presumably growth rates there would rebound further, boosting equity prospects in markets where relative valuations are particularly attractive in a historical context
  • Global Momentum outperformed Global Value last month, while the latter is still ahead on a YTD basis (though underperforming on a trailing 6 months basis …. the bottom line here being that a “regime change” still needs to be confirmed in the “factors” space, judging from this year’s price action).