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Posted by on Oct 27, 2014 in ETF Strategist

AdvisorShares Weekly Market Review – Week Ending 10/24/2014

AdvisorShares Weekly Market Review – Week Ending 10/24/2014

Highlights of the Prior Week

Macro

US markets literally overcame fear of plague last week to rally strongly across the board. The Dow Jones Industrial Average was the weak sister rising “only” 2.58% while the S&P 500 added 4.12%, the NASDAQ went up 5.28% but the Russell 2000 again lagged the broad market going up 3.37%.

Most of the major foreign markets were higher on the week as well but much less so than in the US. The FTSE 100 was up 1.21%, the CAC 40 added 2.47, the DAX was up 1.55%, Australia up a relatively strong 2.47%, the Nikkei 225 up US-like 5.22%, Hong Kong gained 1.28% while Shanghai was the only loser, dropping 1.64%.

The bond market also recovered somewhat from the previous week’s crash. The US Ten Year Treasury Note’s yield added five basis points to 2.27%. More importantly, the action in the trading of the benchmark note returned to normal. The crash that occurred on October 22nd, the yield plummeted 35 basis points in a matter of minutes, saw disorderly trading, bordering on a market malfunction.

Many foreign bonds continue to trade below the US. The bund in Germany closed out the week at 0.89%, the French OAT upticked to 1.31%, Spain yields 2.17% while Italy yields 2.52%. There were several weeks last quarter when the US yielded more than Italy.

One of the biggest news stories of the week was of course the earnings report from Amazon which led investors to take more than 8% out of the name in Friday’s trading. We figure that if you care about the earnings report you’ve already read everything to need to on it but we did want to pass along this quote from Barron’s regarding the Fire phone which the weekly noted “couldn’t have sold worse if it came with a rotary dial.”

Elsewhere in earnings, Zacks offers the following recap for the season thus far;

The updated Q3 earnings season scorecard now shows that we have seen results from 207 S&P 500 members that combined account for 54.1% of the index’s total market capitalization. Total earnings for these 207 companies are up +4.1% from the same period last year, with 68.1% of the companies beating earnings estimates. Total revenues are up a much stronger +4.7%, with 54.6% beating top-line estimates.

Rounding up other markets; crude oil and gold started the week moving higher but closed out the week in the red as equities continued to add to gains. The euro was down against the US dollar, the British pound was slightly negative against the greenback while the dollar added 0.74% against the Japanese yen.

It has been a while since we checked in on the CBOE Volatility Index but as you might expect it has gone on a wild ride over the last month with a massive spike coinciding with the declines from earlier in October. The VIX has then steadily worked its way back to its previous mid-teens range.

Equities in Brazil are not taking the news of incumbent Dilma Rousseff’s election victory well. As of this writing (early Monday morning) many ETFs tracking the country are down high single digits as are many individual Brazilian stocks. So far this has been a sell the rumor and sell the news as equities appeared to be pricing in a Rousseff victory already.

ETF News & Data

Fund flows were somewhat contradictory last week with the top spot for inflows going to a short term US Treasury fund from iShares with just over $1 billion in new AUM. Also in the top ten for additions were the two big indexed high yield bond ETFs which drew a combined $1.45 billion. Two funds tracking the S&P 500 had combined inflows of $1.6 billion while the SPDR S&P 500 lost $1.47 billion. Country funds rarely make the top ten lists in these discussions so it is worth noting that the iShares MSCI Brazil ETF had $636 million come in the gate perhaps speculating on the upcoming election but unfortunately for whoever the shares were created, the fund fell 7.8% for the week.

There were four new funds last week including one new actively managed equity fund from new provider Empowered Funds LLC. JP Morgan dipped another toe in the ETF water partnering with Global X to offer two rules based index funds.

Interesting Reads

We’ve had a few looks in the last few months at something called the Tiny House Movement. This week we offer a first hand account of one couple’s decision to make tiny house living part of their retirement plan (they appear to be in their 50’s now). From the article;

Either way, whatever your priority, it’s a win – all because we are willing to have a living room that converts to a bedroom at night. Everyone has something different that drives them, something that makes them stick out their chest and look around with pride. For some, it’s having a massive status symbol built close to the curb so that everyone that drives by will be envious. For others, it’s the peace and freedom that comes from getting out of the rat race.

Sports

The story of legendary Formula 1 driver Michael Schumacher continues to unfold in a positive direction albeit very slowly. Last winter Schumacher suffered a serious head injury while skiing and was in a coma for six months.

The latest development is that his recovery will now continue at home. Little is being said about his condition beyond he is “not in a coma and nor was he in a ‘vegetative’ state.” While racing seems like a long shot we offer our hopes for a full recovery.

Roger Nusbaum

AdvisorShares ETF Strategist

Source: Google Finance, Yahoo Finance, Wall Street Journal, Bloomberg, Barrons, ETF.com, XTF.com, Yahoo.com, Financial Times, Reuters, Tiny House Listings, Zacks

 

 Weekly ETF Flows

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For October 20, 2014 to October 24, 2014

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S&P Sector Analysis

As for the sectors of the S&P 500, three outperformed the broad benchmark – Healthcare, Technology and Industrials. The remaining seven – Discretionary, Utilities, Energy, Financials, Materials, Staples and Telecom – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 5.92% this week, with Healthcare outperforming all, and Telecom coming in last.

For October 20, 2014 to October 24, 2014

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

2014.10.27_pic 4

 

The AlphaBaskets blog provides frequent market insight and commentary by AdvisorShares Investments, LLC, created by AdvisorShares and other leading active managers.  AdvisorShares Investments is an SEC-registered investment adviser and the investment adviser to the AdvisorShares actively managed ETFs. The views expressed on AlphaBaskets should not be taken as investment advice or a recommendation for any of the actively managed ETFs advised by AdvisorShares.

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