January snapshot

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Every day in the news we hear about the creation of new products or industries based on innovations in technology, old businesses being disrupted and new ways of doing business. Yet for most of us, investing in such trends, ideas and events is less than straightforward. Exchange traded funds (ETFs) may be a vehicle, which can offer exposure to innovative companies that can potentially impact our world. Here we consider some of the major trends making headlines today and ways ETFs may potentially provide exposure to those sectors.

1 Oil price: Oil prices see biggest January loss in 30 years, January 31, 2020. 2,3,4 Forbes: Student loan debt statistics in 2020, February 3, 2020. 5 The Wall Street Journal: Fed’s 2020 rate outlook clouded by framework review, January 31, 2020. 6 CNBC: Rates plunge in January and part of the yield curve inverts again, January 31, 2020. 7The Guardian: German economy stagnates as Eurozone growth hits seven-year low, February 14, 2020. 8 A PMI above 50 indicates expansion compared to the prior month and below 50 means contraction. 9 IHS Markit: IHS Markit Eurozone Manufacturing PMI, February 3, 2020. 10 Zew: Zew press release: expectations continue to increase substantially, January, 21, 2020.

*Source: IEA: Monthly oil market report, February 13, 2020. **The Eurozone Markit manufacturing PMI measures the performance of the manufacturing sector and is derived from a survey of 3,000 manufacturing firms. National data are included for Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland and Greece. ***Forbes: The US still imports a lot of oil, February 12, 2020

Oil dips

“Oil prices have declined sharply in 2020 as the coronavirus lowered growth expectations in China. A higher dollar has also added downward pressure along with lower oil demand expectations from international energy agencies, which started even before the coronavirus. Lower oil prices could weigh on energy producing economies and provide further downward pressure on global growth.”

Bryan Besecker, market strategist, BNY Mellon Investment Management.

Student debt overload

“Since 2003, student debt has risen 11 .6% per year to $1.51 trillion1 and continues to weigh on economic activity particularly in the younger portion of the workforce. A growing student debt burden could limit the growth potential of the US over the longer-term.”

Bryan Besecker, market strategist, BNY Mellon Investment Management.

Fed expectations

“While the Fed has suggested they will keep rates on hold, the market still expects one rate cut in 2020 and the probability has increased as the coronavirus dampened growth and inflation expectations. A growing divergence of expectations between the market and Fed could be a risk to the outlook.”

Bryan Besecker, market strategist, BNY Mellon Investment Management.

Eurozone slowdown

“Improving manufacturing data in the eurozone and overall sentiment towards Germany suggests the region’s slowdown continues to bottom out.”

Bryan Besecker, market strategist, BNY Mellon Investment Management.

Investors should consider the investment objectives, risks, charges and expenses of a fund carefully before investing. To obtain a prospectus, or a summary prospectus, if available, that contains this and other information about a fund, contact your financial advisor or visit im.bnymellon.com. Please read the prospectus carefully before investing.

ETF shares are listed on an exchange, and shares are generally purchased and sold in the secondary market at market price. At times, the market price may be at a premium or discount to the ETF’s per share NAV. In addition, ETFs are subject to the risk that an active trading market for an ETF’s shares may not develop or be maintained. Buying or selling ETF shares on an exchange may require the payment of brokerage commissions.

ETFs trade like stocks, are subject to investment risk, including possible loss of principal. The risks of investing in the ETF typically reflect the risks associated with the types of instruments in which the ETF invests. Diversification cannot assure a profit or protect against loss.

Bonds are subject to interest rate, credit, liquidity, call and market risks, to varying degrees. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes and rate increases can cause price declines. High yield bonds involve increased credit and liquidity risk than higher rated bonds and are considered speculative in terms of the issuer’s ability to pay interest and repay principal on a timely basis.

Equities are subject to market, market sector, market liquidity, issuer, and investment style risks to varying degrees. Small and midsized company stocks tend to be more volatile and less liquid than larger company stocks as these companies are less established and have more volatile earnings histories.

Investing in foreign denominated and/or domiciled securities involves special risks, including changes in currency exchange rates, political, economic, and social instability, limited company information, differing auditing and legal standards, and less market liquidity. These risks generally are greater with emerging market countries.

Past performance is no guarantee of future results.

This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular investment, strategy, investment manager or account arrangement. Please consult a legal, tax or investment advisor in order to determine whether an investment product or service is appropriate for a particular situation.

Views expressed are those of the author stated and do not reflect views of other managers or the firm overall. Views are current as of the date of this publication and subject to change. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. BNY Mellon Investment Management is one of the world’s leading investment management organizations and one of the top U.S. wealth managers, encompassing BNY Mellon’s affiliated investment management firms, wealth management organization and global distribution companies. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation and may also be used as a generic term to reference the Corporation as a whole or its various subsidiaries generally. BNY Mellon ETF Investment Adviser, LLC is the investment adviser and BNY Mellon Securities Corporation is the distributor of the ETF funds, both are subsidiaries of BNY Mellon.

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