AdvisorShares Weekly Market Review – Week Ending 10/25/13
Highlights of the Prior week
For the week of October 21 – October 25
The winning Streak Continues
The stock market continued to rise as most major indices were positive last week, including the S&P 500 Index which neared an all-time high. Items affecting the markets last week consisted of a better than expected durable goods report and continued speculation that the Federal Reserve will delay their taper into first or second quarter of 2014. As the stimulus program being implemented by the Fed continues to purchase assets in the capital market, we keep asking ourselves what this is going to look like on the other side. The Fed balance sheet is approaching $4 Trillion, which is a four times increase from 2008, and will present a difficult situation to unwind for a team of Fed bankers that historically have not been in the asset manager business. As we all recognize rates are eventually going up over the long term, we remind you that the situation will be a volatile one as we watch the Fed manage their policy and asset portfolio.
Stay diversified, not only with your asset classes, but also with your managers and the strategies that you are employing for your clients. Have a disciplined rebalancing plan, and forecast or leverage a third party that you trust to forecast different market scenarios going forward. Managing to the current environment has been difficult, but without a plan it will be even more so.
Stock Markets Commentary and Asset Flows
The domestic equity market as measured by the S&P 500 was up 0.88% for the week. International markets as measured by the MSCI EAFE underperformed domestic markets for the week, returning 0.44% with Emerging Markets being the worst performer of the week at -1.41%.
Interestingly, four out of the top ten ETFs that garnered the largest asset flows came from International markets, with Emerging Markets (the worst performing major index) as represented by EEM being the second largest recipient of net new dollars. For the second week in a row, the High Yield asset class popped its head in the top 10, with the remaining 9 ETF asset gatherers for the week being in Domestic, International or Emerging Market equity products. The biggest redemptions came in SPY, almost $3B in outflows. Additionally, where EEM gained, VWO, the Vanguard FTSE EM ETF lost.
Bond Markets Commentary and Asset Flows
Treasury yields fell again on the week as bond prices rose. The U.S. Aggregate bond index rose 0.38% on the week and the High Yield sector was toward the top again this week with returns of 0.54%.
The only representation of fixed income for the top creation units last week were in the High Yield Sector (HYG), whereas on the other side of ETF asset flows saw redemptions in Investment Grade Corp debt (LQD), Emerging Market Bonds (EMB), and the Market Vectors International High Yield Bond ETF (IHY).
Past performance is not indicative of future results.