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Posted by on Nov 2, 2015 in ETF Strategist, Market Insight

AdvisorShares Weekly Market Review – Week Ending 10/30/2015

AdvisorShares Weekly Market Review – Week Ending 10/30/2015

Highlights of the Prior Week

Markets Party Like It’s 2011

Macro

The month of October turned out to be the strongest in four years which came as something as a surprise after declines in August and September but of course the nature of rallies is that they often come as surprises and start after what we’ll call rallies in pessimism.

For the month the Dow Jones Industrial Average gained 8.46%, the S&P 500 rallied 8.31% and the NASDAQ added 9.40%. If there is any concern about the breadth of the rally then it would be that the Russell 2000 lagged noticeably behind with a 5.55% gain. Narrowing breadth has historically been a late cycle phenomenon. We would note that despite the gains in October most of the broad averages are down over the last three months led by a 6.23% decline for the Russell.

Barron’s explored the breadth in great detail over the weekend noting that 52% of S&P 500 components are below their respective 200 day moving averages, only the technology and staples sectors have a majority of their stocks above the August highs and that the index’ ability to make gains from here relies on a handful of megacap tech stocks being able to keep their momentum.

Bespoke Investment Group reports that with more than 80% of companies reporting earnings things have improved on the bottom line with 63% of companies beating earnings estimates but top line performance is still “depressed” with only 46.9% of companies beating revenue estimates. On earnings Barron’s noted that thus far earnings have contracted by 1% but that excluding energy they are up 6.1%.

Most the foreign equity markets we regularly follow in this report had similar or even larger gains. The CAC 40 popped 9.93%, the DAX tacked on 12.32%, Shanghai was good for 10.8%, the Nikkei 225 rallied 9.75% and the Hang Seng had an 8.58% lift. The FTSE 100 and ASX 200 lagged behind gaining 4.94% and 4.34% respectively.

We certainly do not know whether this was a 2011-like correction that is now over or a bear market that is taking a breather but if it was a correction then it was a great example for advisors of why not to completely sell clients out in knee-jerk fashion in the name of defense and if it is a bear market then it is like most previous bear markets in that it is starting slowly over the course of several months giving plenty of time to reduce exposure.

The rally in yields continued last week with the US Ten Year Treasury Note bumping up to 2.15%. The backdrop for higher yields is somewhat mixed as on the one hand GDP for Q3 printed at 1.5% and consumer confidence weakened but there was some hawk-talk from the Fed that a December hike is still on the table.

The German bund yield was essentially flat at 0.52%, the French OAT was also essentially flat at 0.86%, the Swiss ten year backed up slightly to -0.27% while Spain moved to 1.67% and Italy now yields 1.48%.

West Texas Intermediate Crude continues to confuse and confound markets. Last week started with a steep selloff followed by a big bounce to close out the week with a 3.64% gain. The rollover in gold continued last week with a 1.94% decline. As equities rallied in October, gold trended lower for most of the month. As an ongoing theme here we note the low to negative correlation between domestic equities and gold appears to be alive and well.

ETF News & Data

Last week was a busy one for new ETFs with five new funds including one that targets the restaurant industry, a new China A Share fund and several foreign equity funds from WisdomTree with various narrow objectives.

The SPDR S&P 500 has been at or near the top of both the creation and redemption board with very little in the way of a discernable trend, last week it had $2.5 billion in creations. There were also creations in high yield debt and redemptions in short term treasuries which makes sense if sentiment has moved back to risk-on.

Interesting Reads

Retailer REI made news when it announced On Black Friday, Shoppers At REI Will Be Turned Away And Told To Go Outside Instead.

From Quartz.com’s coverage:

“As a member-owned co-op, our definition of success goes beyond money. We believe that a life lived outdoors is a life well lived and we aspire to be stewards of our great outdoors,” CEO Jerry Stritzke said.

Sports

Thursday night Arizona State played the University of Oregon and honored the memory of Pat Tillman. The team wore uniforms from Tillman’s day in 1996, all the players had Tillman’s name on the back of their jerseys as well as camouflage inspired undershirts.

From ESPN’s coverage:

“Pat Tillman Foundation and Arizona State University have a proud history of supporting our nation’s veterans and military spouses,” said Marie Tillman, president and co-founder of the Pat Tillman Foundation, in a statement released from the school. “This special tribute honors Pat’s example as an athlete, scholar and soldier, while raising awareness and academic support for the Tillman Scholars who are carrying on his legacy. We’re grateful to Coach (Todd) Graham, the players and adidas for empowering these leaders as they continue their service to our country.”

Source: Google Finance, Yahoo Finance, Wall Street Journal, SeekingAlpha, Bloomberg, Reuters, Barrons, ETF.com, XTF.com, Bespoke Investment Group, ESPN, Quartz.com
 
2015.11.02_Table1

Weekly ETF Flows

For October 26th, 2015 to October 30th, 2015

2015.11.02_Table2

S&P Sector Analysis

As for the sectors of the S&P 500, four outperformed the broad benchmark – Healthcare, Discretionary, Materials, and Telecom. The remaining six – Financials, Energy, Technology, Industrials, Staples, and Utilities – each underperformed.  The dispersion between the top-performing and bottom-performing sectors was roughly 4.96% this week, with Healthcare outperforming all, and Utilities coming in last.

For October 26th, 2015 to October 30th, 2015

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

2015.11.02_Table3

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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