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Posted by on Oct 26, 2015 in ETF Strategist, Market Insight

AdvisorShares Weekly Market Review – Week Ending 10/23/2015

AdvisorShares Weekly Market Review – Week Ending 10/23/2015

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Highlights of the Prior Week

Make That Four Weeks Of Gains

Macro

The equity market bounce continued for a fourth straight week as indexes not only rallied but continued to take back previously breached support levels. Most of the rally occurred on Thursday and Friday due in part to strong earnings from some of the mega cap, technology bellwether companies with broad tech sector ETFs gaining more than 3% to close out the week.

Rounding up the numbers, the Dow Jones Industrial Average gained 2.52%, the S&P 500 rallied 2.06% and the NASDAQ added 2.98%. If there was a fly in the ointment it was the lack of participation by the Russell 2000 which could only manage a 28 basis point lift.

Foreign markets were generally higher as well. The FTSE 100 gained 1.04% the CAC 40 was up 4.61% and the DAX in Germany gained 6.83% as Mario Draghi signaled full steam ahead on accommodative monetary policy. Asia was more muted with the Shanghai Composite gaining 65 basis points, the Hang Seng rallied 3.1% while the Nikkei added 2.94% and the ASX 200 moved ahead 1.58%.

As confidence was restored to domestic equities it was also restored in the domestic bond market in the form of slightly higher yields. The US Ten Year Treasury Note added six basis points to 2.08%. Foreign yields declined however as the German bund yield fell to 0.51% in the face of more stimulus from the ECB, likewise the French OAT fell to 0.85%, the Swiss ten year again moved further into negative territory at -0.29%, Spain fell to 1.63% and Italy now yields 1.49%.

Focusing in a little more on earnings, Bespoke Investment Group reports that 60% of companies that have reported earnings thus far have come in ahead of estimates and that on the top line, 42% have beaten estimates.

West Texas Intermediate Crude fell 5.8% after falling 5.5% the previous week. While cheaper energy prices are viewed as a net positive, there are not many positives from the ongoing volatility in the space. Gold was down slightly on the week. The Wall Street Journal posted an article about gold’s waning appeal as a “safe haven” which was puzzling to us. If gold is a “safe haven” it is because it has a low to negative correlation to equities. In the three months through October 20th while equities fell 5%, gold as measured by one of the popular ETFs gained 6%. Gold has certainly been a poor performer over the last few years while equities have skyrocketed. Gold appears to be doing exactly what it is supposed to do, we would argue that if gold is your top performing asset then chances are things aren’t going so well.

ETF News & Data

For the last few weeks, creations and redemptions have been all over the place appearing to be trendless and this continued to be the case last week. Large cap equities, foreign equities and various sectors of the bond market all showed up in both creations and redemptions perhaps evidence of a confused market.

There were four new ETFs last week; three targeting Chinese equities and a dividend-centric fund from SPDR.

Interesting Reads

Any fans of the quirky show Northern Exposure will want to read Magical Realism: Northern Exposure 25 Years Later at Roger Ebert’s blog. Although a bit much in places it is a worthwhile read.

Most importantly, he meets two residents around whom his spiritual journey will be based: Ed Chigliak (Darren E. Burrows), a young Native American filmmaker and budding cinephile, and Maggie O’Connell (Janine Turner), the Grosse Pointe refugee whose relationship with Fleischman will form the backbone of the series. It is this triangle of interactions I want to use as a metaphor in what follows, because I think Joel, Ed, and Maggie each offer overlapping windows on “Northern Exposure”‘s role in a broader TV landscape, and why the program still resonates.

Sports

Ask anyone from New England who the greatest hockey play of all time is and you will get just one answer, there is no debate in that part of the country. The Boston Globe reports that At 65, Bobby Orr Is Focused On Doing Good. The article is a couple of years old but very uplifting.

His work changing lives is much less known, for a simple reason: He won’t talk about it and loathes anyone else talking about it. The idea of receiving credit — or worse, appearing to seek credit — for doing what a good person does repulses Bobby Orr. This article, which touches on some of those quiet acts of kindness was, in a real sense, written against his wishes.

Source: Google Finance, Yahoo Finance, Wall Street Journal, SeekingAlpha, Bloomberg, Reuters, Barrons, ETF.com, XTF.com, Bespoke Investment Group, Boston Globe, RogerEbert.com
 
2015.10.26_Table1
 
Weekly ETF Flows

For October 19th, 2015 to October 23rd, 2015

2015.10.26_Table2
 
S&P Sector Analysis

As for the sectors of the S&P 500, four outperformed the broad benchmark – Technology, Industrials, Financials, and Staples. The remaining six – Materials, Discretionary, Telecom, Utilities, Healthcare, and Energy – each underperformed.  The dispersion between the top-performing and bottom-performing sectors was roughly 5.60% this week, with Technology outperforming all, and Energy coming in last.

For October 19th, 2015 to October 23rd, 2015

As measured by the S&P 500 sector indices, respective performances were:

2015.10.26_Table3

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