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Posted by on Jan 5, 2015 in ETF Strategist

AdvisorShares Weekly Market Review – Week Ending 1/2/2015

AdvisorShares Weekly Market Review – Week Ending 1/2/2015

Highlights of the Prior Week

Macro

Despite another year of double digit equity market returns the past week saw small declines across the board. The Dow Jones Industrial Average fell 1.26%, the S&P 500 was down 1.49%, the NASDAQ gave up 1.68% and the Russell 2000 was down 1.37%. For 2014, Yahoo Finance reports the S&P 500 up 12.39% on a price basis, the Dow up 8.22%, the NASDAQ led the way with a 14.62% and lagging far behind was the Russell 2000 with a 4.2% gain. The relatively weak showing by the Russell has historically been a negative indicator.

The yield on the Ten Year US Treasury Note finished the year at 2.17% but closed the week at 2.12% after a big price rally on Friday. Yields in Europe fell dramatically last week with the German bund falling to 0.50%, the French OAT down to 0.78%, Switzerland went against the trend up to 0.37%, Spain fell 23 basis points to 1.50% and Italy now yields 38 basis points less than the US at 1.74%.

In commodities much was made of course of the massive, crash-like, decline in oil. For the year West Texas Intermediate Crude fell 44% but from its mid-year high it actually dropped just over 50%. Gold had a blah 2014 with a 4% decline but it too had a large decline of 11% from its March high. It should not be a surprise that gold would drop as equity prices march higher but the drop in oil is unusual as steady or increasing demand for oil is believed to be an indicator of strong economic activity. Part of the story here could end up being an increase in supply leading to lower prices. For the past week both commodities sold off; crude oil down 4.45% and gold down 46 basis points.

In the currency round up the euro was lower against the dollar by 1% last week and 11% for the year. The British pound was the strongest of the majors registering only a 6.6% fall versus the greenback last year and of course the big story was the Japanese yen. The dollar was up 14% with essentially all of that gain coming in just the last six months of the year.

The euro was moving markets on Monday on continued concerns about the political situation in Greece which appeared to cause a he said/she said about whether the country would or would not leave the euro. EURUSD broke below 1.20 on this news trading briefly in the 1.18 range. At some point expensive US goods sold overseas will become a problem for US multinationals but in the meantime it might be a good time to buy a Toyota or take a trip to Europe.

Looking forward, this week the December jobs report is due. Estimates call for 225,000 new jobs versus 265,000 created last month and for the headline unemployment rate to hold at 5.8%. If the number should turn out to be disappointing it will likely be attributed to the termination of seasonal retail jobs that come in the form of extra Christmas help that is usually hired around Thanksgiving.

ETF News & Data

As part of what will obviously be many year in review articles published, ETF.com reported that fund flows into ETFs in 2014 totaled $243 billion, an increase of 12%. There were 197 new funds launched and 88 funds that closed. The Wall Street Journal Money Beat Blog noted that traditional mutual fund inflows were less than half what they were in 2013.

There were two new equity index ETFs last week, one from ALPS focused on biotech and a Russell 1000 equal weight fund from PowerShares.

Last week we noted the massive $25 billion inflow into the SPDR S&P 500 and wondered whether that would quickly reverse. So far most of it has stayed in the fund with only $745 million leaving the fund last week. Interestingly the S&P 500 fund from iShares saw $1.4 billion of inflows. The leader in outflows was an iShares fund targeting US t-bill exposure which lost about 7% of its AUM or $2.5 billion.

Interesting Reads

The New Year always sparks conversation of resolutions and many resolutions involve exercising. Kettlebells can make for a very effective strength workout. Here is set of kettlebell exercises for men from Muscle For Life and another set from Lululemon for women. Of course the lists are almost identical.

Sports

We were saddened to learn of the passing of long time Sportscenter Anchor and pop culture icon Stuart Scott. He fought his cancer bravely and was an inspiration to many people. The ESPN website provides full coverage of his early years, the evolution of his career all with plenty of humorous anecdotes. One not mentioned but might say a lot about the man came from his stint on the old-format version of NFL Primetime. Chris Berman and Tom Jackson were of course the stars of the show and say center stage. Off to the side, literally, was Stuart Scott to recap the day’s lesser games which this season might have been any game involving the Tampa Bay Buccaneers.

A thread of jokes started to emerge about the games that Stuart was covering to the point that the became known as ‘Stu Games’ and he went right along with it but still gave all his effort and Stu-ness to the highlights nonetheless.

The 2015 Dakar Rally starts this week with daily coverage aired on the NBCSports Network every day at 4pm or 4:30pm EST. The Dakar is an off-road race with four classes of vehicle that runs through mostly desert terrain in South America. The race had to be moved from Africa to South America in 2009 after the 2008 event was cancelled due to threats of violence.

The scenery and the race action make for great viewing.

Roger Nusbaum

AdvisorShares ETF Strategist

Source: Google Finance, Yahoo Finance, CNBC, Wall Street Journal, Bloomberg, Barrons, ETF.com, XTF.com, Convergex, Lululemon Blog, Muscle For Life.

2015.1.5_Chart1

Weekly ETF Flows

For December 29, 2014 to January 2, 2015

2015.1.5_Chart2S&P Sector Analysis

As for the sectors of the S&P 500, five outperformed the broad benchmark – Energy, Healthcare, Discretionary, Financials and Materials. The remaining five – Telecom, Industrials, Utilities, Staples and Technology – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 1.79% this week, with Energy outperforming all, and Technology coming in last.

For December 29, 2014 to January 2, 2015

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

2015.1.5_Chart3

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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