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

AdvisorShares Weekly Market Review – Week Ending 1/23/2015

AdvisorShares Weekly Market Review – Week Ending 1/23/2015

Highlights of the Prior Week

Macro

The big news of the week was the fully expected news that the European Central Bank will begin asset purchases to the tune of €60 billion per month running from March through September. And while this was not a surprise it still had the effect of lifting stock prices, sinking bond yields and pushing currency markets around.

Equities were generally higher last week expect for Shanghai which was down slightly. The Dow Jones Industrial Average was up 84 basis points, the S&P 500 gained 1.62% with the Russell 2000 adding 1% and the NASDAQ led the way with a 2.68% lift.

In Asia the Nikkei 225 was up 3.84%, the Hang Seng gained 3.1% and the Australian ASX 200 added 3.82%. Europe had bigger gains with the FTSE 100 up 4.22%, the German DAX up 4.74%, the Swiss Market Index recovered some of last week’s crash with a 3.32% snapback and France added 6.1%. Over the last six weeks the French market is up 15%.

The ECB QE news moved interest rates noticeably. The German bund yield fell to 0.36%, French OAT now yields 0.54%, Spain’s ten year fell to 1.38% and Italy now yields 1.53% compared to 1.81% in the US. Last week we noted that in reaction to the Swiss National Bank dropping its peg to the euro its ten year yield fell to 0.03%. The ECB news sent Swiss ten year yields to negative 26 basis points.

In related news the central banks of Denmark and Canada also cut rates. Ten year paper in Denmark yields 42 basis points and in Canada ten years will get you 1.45%.

Currency movement was also interesting. Not surprisingly the euro fell 3% against the dollar while the British pound gave up 1% and the greenback gained very modestly against the yen. The euro also dropped 2% against the pound, 3% against the yen and just under 1% against the Swiss franc. You’ve heard the term race to the bottom in currencies and QE should put downward pressure on a currency.

Finally in commodities, gold rallied 2%. More and more attention recently is being paid to gold denominated in currencies other than the US dollar. This has been an important topic of conversation here at AdvisorShares for over a year and is now popping up on other people’s radar. Over the last month, gold in dollars was up 9% versus up 19% for gold priced in euros.

West Texas Intermediate Crude fell almost 6% but in the last few weeks the price has been churning in the mid to high $40 not making progress in either direction. This is a sign of trying to find a bottom but for now it is too early to know where the bottom will be.

ETF News & Data

For the last few weeks we’ve been following what was a massive inflow of $25 billion into the SPDR S&P 500 at the end of the year and has since been an unwinding of those inflows in the New Year. Last week’s outflow was $6.6 billion bringing the year to date outflow to $22 billion almost completely reversing what we speculated could have been window dressing into the year end. The pattern shown leaves the door open to believe window dressing is alive and well.

Two other notable names on the outflow list were the PowerShares QQQ and the iShares Emerging Markets ETF both of which had just shy of $1 billion redeemed and were both discussed in Barron’s ETF column. They suggest that the changes over the years to the NASDAQ 100 Index have made the PowerShares fund obsolete as a tech proxy. The iShares Emerging Markets fund is now relatively expensive compared to other funds in the space.

There were two new funds launched last week as ETF Securities, known for its single-commodity funds threw its hat into the equity ring with two broad based domestic funds.

Interesting Reads

The Huffington Post took a look at States Where The Middle Class Is Dying. The big idea of the article is to consider income growth for the the top quintile or 20% of the population versus a decline in real income for the middle quintile or 20% of the population.

The significance of this is that historically it has been the middle class that has driven economic recovery and expansion but that is not happening in manner it has in the past. There have been several aspects of this recovery that have not been like previous economic cycles but it is difficult to see the expansion having longer life without the middle class.

Sports

There’s a lot of ground to cover this week however we’ll leave deflate gate to the rest of the world.

ESPN took an in depth look Inside Manziel’s Rookie Season. His story transcends sports for the spectacle he has made of himself. His rookie season was a disappointment for what the article says was a lack of preparation, poor practice habits and not taking the situation seriously enough. The article cites unnamed teammates as saying when he got his chance to start he did not call plays properly in the huddle which is an obvious impediment to execution on the field. There is far more the the story though.

Friday night, Golden State Warriors guard Klay Thompson, son of former NBA player Mychal Thompson, set a record when he scored 37 points in the 3rd quarter in the team’s win over the Sacramento Kings. Thompson set the record, previously held by George Gervin and Carmelo Anthony, by shooting 13 for 13 from the field including nine three pointers and two for two from the free throw line.

Sports

The 2015 Dakar Rally finished up over the weekend. The Quad Class was won by 48 year old Rafal “Super” Sonik from Poland who offered the following inspirational quote in his post race interview;

The biggest achievements are always ones of trust and belief …passion always pays back.

 

Roger Nusbaum

AdvisorShares ETF Strategist

Source: Google Finance, Yahoo Finance, Wall Street Journal, Bloomberg, Barrons, ETF.com, XTF.com, Convergex, 24 Hour Gold, Huffington Post.

 

2015.1.26_Chart 1Weekly ETF Flows

For January 19, 2014 to January 23, 2015

2015.1.26_Chart 2S&P Sector Analysis

As for the sectors of the S&P 500, Three outperformed the broad benchmark – Technology, Industrials and Discretionary. The remaining five – Energy, Financials, Utilities, Healthcare, Staples, Materials and Telecom – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 4.23% this week, with Technology outperforming all, and Telecom coming in last.

For January 19, 2014 to January 23, 2015

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

2015.1.26_Chart 3

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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