First
Trust Exchange-Traded Fund VI
Semi-Annual Report
September
30, 2023
Robert
F. Carey, CFA
Senior
Vice President and Chief Market Strategist
First
Trust Advisors L.P.
Mr. Carey
is responsible for the overall management of research and analysis of the First
Trust product line. Mr. Carey
has more than 30 years of experience as an Equity and Fixed-Income Analyst and
is a recipient of the
Chartered Financial Analyst (“CFA”) designation. He is a graduate of the
University of Illinois at Champaign-Urbana
with a B.S. in Physics. He is also a member of the Investment Analysts Society
of Chicago
and the CFA Institute. Mr. Carey has appeared as a guest on such programs as
Bloomberg TV, CNBC, and
WBBM Radio, and has been quoted by several publications, including The
Wall Street Journal, The
Wall Street Reporter, Bloomberg News Service and Registered Rep.
State
of the Global Economy
The latest
global growth forecast from the International Monetary Fund (“IMF”) released in
October 2023 sees real gross domestic product
growth rising by 3.0% worldwide in 2023, up from its 2.9% projection in January
2023. The IMF is currently forecasting a 2.1%
growth rate for the U.S., up from its January 2023 estimate of 1.4%. Emerging
Market and Developing Economies are expected to grow by
4.0% this year, unchanged from the IMF’s 4.0% estimate in January 2023. The IMF
notes that risks to their global outlook remain
tilted to the downside, citing the real estate crisis in China, the potential
for increased volatility among commodity prices, and uncomfortably
high inflation, among other reasons, for their outlook.
In the
U.S., inflation, as measured by the Consumer Price Index (“CPI”), stood at 3.7%
on a trailing 12-month basis at the end of September
2023, according to the U.S. Bureau of Labor Statistics. While this is
significantly lower than the most recent high of 9.1% in June
2022, the September CPI reading reflects a re-acceleration in the metric
when compared to its most recent low of 3.0% set on June 30,
2023.
Performance
of Global Stocks and Bonds
The major
U.S. stock indices delivered mixed results over the past six months. The S&P
500® (the
“Index”), S&P MidCap 400® and
S&P
SmallCap 600® Indices
posted total returns of 5.18%, 0.45% and -1.71%, respectively, for the six-month
period ended September
30, 2023. Seven of the 11 major sectors that comprise the Index were positive on
a total return basis. The top performer was the
Communication Services sector, up 16.54%, while the worst showing came from the
Utilities sector, down 11.54%.
A
Bloomberg survey of twenty-two equity strategists found that their average 2023
year-end price target for the Index was 4,370 as of October
18, 2023, according to its own release. The highest and lowest estimates were
4,900 and 3,700, respectively. The Index closed trading on
September 29, 2023, at 4,288.05. Bloomberg’s consensus year-over-year earnings
growth rate estimates for the Index for the 2023
and 2024 calendar years stood at -2.83% and 11.89%, respectively, as of October
13, 2023.
The
broader foreign stock indices experienced negative total returns over the past
six months. For the six months ended September 30, 2023, the
MSCI World ex USA and MSCI Emerging Markets equity indices posted total returns
of -1.20% (USD) and -2.05% (USD), respectively,
according to Bloomberg. The major foreign bond indices were also down over the
same period. The Bloomberg Global Aggregate
Index of higher quality debt posted a total return of -5.06% (USD), while the
Bloomberg EM Hard Currency Aggregate Index of
emerging markets debt fell by 1.18% (USD), according to Bloomberg. The U.S.
dollar rose 3.58% over the past six months against a
basket of major currencies, as measured by the U.S. Dollar Index (DXY). The
increase in the dollar proved to be a headwind to the
performance of both foreign stock and bond indices, in our opinion.
Results
were mixed in the U.S. bond market over the period. The top performing major
debt group we track was intermediate U.S. high yield
bonds. The Bloomberg Intermediate U.S. High Yield Index posted a total return of
2.29% for the six-month period ended September
30, 2023. The worst performing U.S. debt group that we track was municipal
bonds. The Bloomberg Long Municipal Bond (22+) Index
posted a total return of -6.03%. The yield on the benchmark 10-Year Treasury
Note (“T-Note”) rose by 110 basis points in the
period to close at 4.57% on September 29, 2023, according to Bloomberg. For
comparative purposes, the average yield on the 10-Year
T-Note was 2.27% for the 10-year period ended September 30,
2023.
