This Week in Quantlake ETFs: Curve shift to duration

Value and dividends keep control as growth slips back

Equity momentum leadership stayed anchored in value, dividends and smaller caps this week, while large-cap growth remained the clear laggard. Versus last week’s broad, near-unanimous improvement, the tape turned more two-sided, with cooling concentrated in growth and global beta exposures even as several domestic cyclicals kept firming.

The regime still reads as rotation rather than a single-factor tape because key leaders continue to show decoupling in correlation to SPY versus their 1-year mean alongside large positive alpha contribution. SPDR S&P Dividend ETF (SDY) shows correlation to SPY of 0.33 versus 0.67, and iShares Select Dividend ETF (DVY) sits at 0.38 versus 0.72. SPDR Portfolio S&P 400 Mid Cap Value ETF (MDYV) also remains below its norm at 0.54 versus 0.76.

Breadth cooled over the week, with 7 of the ETFs we track showing momentum improvement and 10 weakening. The top week-over-week momentum gainers were SPDR Portfolio S&P 400 Mid Cap Growth ETF (MDYG) at +1.5 points, DVY at +1.5 points, and SPDR Portfolio S&P 600 Small Cap Growth ETF (SLYG) at +1.4 points. The largest decliners were iShares MSCI EFA Value ETF (EFIV) at -2.7 points, iShares Russell 1000 Growth ETF (IWF) at -1.9 points, and SPDR Portfolio S&P 500 Value ETF (SPYV) at -1.7 points; Invesco QQQ (QQQ) flipped negative.

In level terms, SPDR Portfolio S&P 600 Small Cap Value ETF (SLYV) sits in the top decile alongside DVY, with SDY close behind in the upper third. MDYV remains in the upper third, while QQQ and SPDR Portfolio S&P 500 Growth ETF (SPYG) sit in the lower half. IWF stays in the bottom decile.

Stretch is now concentrated in the dividend complex. SDY is statistically stretched with a Z-score of 2.58 and sits at its 12-month peak, which flags exhaustion risk and normalization risk. DVY is also statistically stretched at 2.04 and is at its 12-month peak, while most of the rest of the universe looks elevated or depressed but not extreme.

Attribution continues to separate idiosyncratic leaders from beta proxies. SDY and DVY pair lower correlation to SPY with sizable alpha contribution of 12.5 points and 12.9 points, respectively, consistent with improving internal dispersion. By contrast, Vanguard Total World Stock ETF (VT) and EFIV behave more like beta proxies, with correlation to SPY at 0.95 and 0.97 and more modest alpha contribution.

Our take: last week’s rotation framework still holds, but this week’s mixed breadth and QQQ’s flip back below zero sharpen the split between idiosyncratic dividend leadership and persistent growth drag.

Credit still sits at the front of our fixed income tape, but this week the curve picture rotated sharply as duration moved from laggard to fast improver. The result is a more unified backdrop, with leadership less concentrated in spread product than it was last week.

Linkage to the broad equity benchmark remains the key separator. SPDR Bloomberg High Yield Bond (JNK) shows high positive correlation at 0.81, consistent with risk-on sensitivity that can participate when equities advance but offers reduced hedging effectiveness in drawdowns. At the other end, iShares 3–7 Year Treasury Bond (IEI) stays negative at -0.26 and Vanguard Intermediate-Term Treasury (VGIT) is -0.23, keeping the Treasury sleeve more defensive.

Breadth stayed strong over the week: 10 of the ETFs we track strengthened on a 3-month trailing basis, while one weakened. The biggest momentum accelerations were iShares 20+ Year Treasury Bond (TLT) at +3.3 points, iShares iBoxx $ Investment Grade Corporate Bond (LQD) at +1.4 points, and iShares Core US Aggregate Bond (AGG) at +1.1 points. The smallest shifts were JNK at +0.2 points, Vanguard Short-Term Corporate Bond (VCSH) at +0.4 points, and iShares JPMorgan USD Emerging Markets Bond (EMB) at +0.8 points. TLT flipped positive.

In level terms, EMB and JNK sit in the top decile, with LQD in the upper third. TLT and AGG have moved into mid-pack, while Vanguard Total International Bond (BNDX) and iShares TIPS Bond (TIP) sit in the lower half.

Statistical stretch remains muted. Z-scores stayed well inside typical ranges, and even TLT’s sharp acceleration comes with only a modest Z-score of 0.35, framing the move as normalization rather than a binding ceiling.

Attribution points to a mix of beta and idiosyncratic leadership. JNK’s momentum still reads more like a beta proxy, pairing 0.81 correlation with only +1.0 points of alpha contribution. EMB looks more internally driven, with correlation down at 0.18 versus a 1-year mean of 0.51 and +2.4 points of alpha, while LQD combines moderate correlation of 0.24 with +2.0 points of alpha.

Our prior view that credit led while duration lagged is now complicated by duration’s sharp catch-up in momentum velocity, even as credit remains the top-end anchor in our universe.

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