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Posted by on Feb 6, 2014 in Market Insight

AdvisorShares Weekly Market Review – Week Ending 1/31/2014

AdvisorShares Weekly Market Review – Week Ending 1/31/2014

Highlights of the Prior Week

Macro

After a year with very little downside volatility, volatility as measured by the CBOE S&P 500 Volatility Index known more commonly by its ticker symbol, VIX, jumped 34% last month. While that is a big move it closed out the month below 20. VIX didn’t stay below 20 very long of course as it rocketed right past that level on Monday when the S&P 500 welcomed Janet Yellen into her new job with a 2.28% decline.

In reaction to equities dropping the yield on the ten year US Treasury Note closed out the month with a 35 basis point decline down to 2.66% and kept falling on Monday down to 2.58%

Making the rounds is a new twist on the January barometer. According to the Stock Trader’s Almanac “every down January on the S&P 500 since 1938, without exception, has preceded a new or extended bear market, a 10% correction or a flat year.” The market can still finish the year higher but historically it would come via a meaningful decline. Obviously this type of indicator is only right until it is wrong but it is interesting.

Foreign Markets

Where a couple of weeks Argentina was the center of attention after its currency, the peso, imploded markets shifted focus toward Turkey which raised interest rates to defend its currency the lira after what Bespoke Investment Group reported as a 34% decline in its currency against the US dollar over the last year.

While the S&P 500 did drop 3.55% in January according to Yahoo Finance, foreign markets fared worse as the iShares MSCI EAFE Index ETF (NYSE: EFA) declined 5.20% and the iShares MSCI Emerging Market ETF (NYSE: EEM) fell 8.6% for the month.

The most talked about current event after Turkey is that the Nikkei is now down 14% in 2014 (as of Tuesday) which meets many people’s definition of a correction but such a big move in barely over a month might be better thought of as a crash; certainly this is a fast decline.

ETF News & Data

Despite a relatively weak start for foreign markets two of the three top funds for the month by inflows are foreign. XTF reported that Vanguard FTSE Europe ETF (NYSE: VGK) had $1.27 billion in flow and the Vanguard FTSE Developed Markets ETF (NYSE: VEA) had $824 million in new assets.

The SPDR S&P 500 (NYSE: SPY) lead the way in outflows with $15.5 billion followed by EEM at $5.4 billion and Vanguard FTSE Emerging Markets (NYSE: VEO) at $2.7 billion.

Interesting Reads

The Boston Review looked at How Dogs Love Us by Gregory Berns in tremendous detail. Anyone who is a dog person will absolutely learn a few things from the 3500 word review but it is also over the top considering the starting point could be as simple as dogs are great companions who love us unconditionally. However the title of the article is spot on; Dogs Are Not People and they are also not children.

Sports

The Super Bowl turned out to be a disappointment for a game that was not competitive and for commercials that weren’t particularly memorable. It was widely known that Seattle would try to keep Denver’s offense off the field and in the first quarter the Broncos time of possession was 3:41. More importantly it seemed as though the first play safety that Denver gave up, aside from supposedly winning Mark Cuban $20 million in Las Vegas, proved to be a punch in the mouth that the Broncos never recovered from.

 Roger Nusbaum
AdvisorShares ETF Strategist
 
 2 6 2014 picture
 

Weekly ETF Flows

For January 27, 2014 to January 31, 2014

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S&P Sector Analysis

As for the sectors of the S&P 500, six outperformed the broad benchmark – Utilities, Healthcare, Materials, Industrials, Telecom, and Financials. The remaining four – Technology, Discretionary, Energy, and Staples – each underperformed.  The dispersion between the top-performing and bottom-performing sectors rose to 4.64% this week, with Utilities outperforming all, and Staples coming in last.

For January 27, 2014 to January 31, 2014

Sector performances, as measured by the S&P 500 sector indices were:

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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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