AdvisorShares Weekly Market Review – Week Ending 2/5/2016
Highlights of the Prior Week
A Mostly Positive (?) Jobs Report Can’t Help Markets
Was it a good jobs report or not? It is tough to tell. The number of jobs created last month was 151,000 which was well below expectations. The headline unemployment rate dropped a tick to 4.9% when it was expected to stay flat. The broader U6 number was flat at 9.9%, in line with expectations. The labor force participation rate inched up to 62.7% and while that is a very low number, higher in this case is better. Wages surprised to the upside with a 0.5% pop.
Most, but not all, of those data points seem favorable and while a decline for equities can come from anywhere for any reason it is difficult to draw a positive conclusion about the continued drop in the ten year bond yield. The trend since the Fed hike in December has been for lower rates and a curve flattening which does not bode well for economic growth.
An additional source of concern is the extent to which companies who’ve disappointed with their earnings reports (either with results or guidance) have been punished. This includes, social media, large internet retailers and the cloud space. While we can’t know until after the fact, the odds that we are now in a bear market have increased.
It was a very choppy week but equities markets were lower as the Dow Jones Industrial Average fell 1.60%, the S&P 500 dropped 3.10%, the NASDAQ was down 5.42% and the Russell 2000 gave up 4.76%.
Europe took it on the chin with the DAX giving up 5.13%, the CAC 40 was down 4.85% and the FTSE 100 shed 3.86%. Asian markets were mostly lower except for the Shanghai Composite which gained 97 basis points. The Nikkei 225 fell 3.98%, the Hang Seng gave up 2.05% and the ASX 200 slid 61 basis points.
The Ten Year US Treasury Note finished the week at 1.84%. The German bund traded down to 0.29%, the French OAT was slightly lower at 0.62%, the Swiss ten year dropped to -0.28%, Spain’s yield went up ten basis points to 1.61% while Italy too saw its yield rise, closing out at 1.51%.
If equities were down then that must mean West Texas Intermediate Crude also fell, and it did, giving up 6.2% while gold lifted 4.6%. As equities have fallen this year, not surprisingly gold has rallied as have the shares of gold mining companies, one of the larger ETFs tracking the mining space is up 24% in 2016.
ETF News & Data
Fund flows showed a risk-off trend last week with inflows into low volatility equity funds, utilities, gold and US treasuries. There were large outflows from funds tracking the S&P 500, domestic small caps and to a lesser extent the energy sector.
There were no new funds listed last week. There was a flurry of new funds in the middle of January but only one new fund in the last two weeks.
Like something out of the X-Files, many news outlets are reporting stories like this one from the Mirror in the UK; Horrified Cabbies Pick Up “Ghost Passengers” In Area Devastated By 2011 Japan Tsunami.
In each instance, the story is similar. A taxi driver in north-east Japan picks up a passenger in an area devastated by the 2011 earthquake and tsunami. They start the meter and ask for the destination, to which the customer gives a strange response. Either then, or sometime later, the driver turns around to address the man or woman – but they have vanished. This is because, it is claimed, they were a ‘ghost passenger’ who was, in fact, killed in the disaster five years ago.
The New York Times reports Willie Wood Made the Most Memorable Play of Super Bowl I. He Has No Recollection. This article is part of a growing awareness that retired NFL players suffer long term consequences from concussions and that retired NBA players die young from heart problems.
From the Times on Wood;
Wood’s interception is one of the most famous plays in Super Bowl history. Fifty football seasons later, (Kansas City Chiefs Quarterback Len) Dawson, who played 19 years of pro football, recalls it well. “Maybe the No. 1 play I wish I could have back,” he said. Wood remembers nothing of the play. He does not even recollect playing in the first Super Bowl, on Jan. 15, 1967, or ever being on an N.F.L. roster.
For February 1st, 2016 to February 5th, 2016
As for the sectors of the S&P 500, five outperformed the broad benchmark – Materials, Utilities, Telecom, Industrials, and Staples. The remaining five – Healthcare, Energy, Financials, Technology, and Discretionary – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 10.18% this week, with Materials outperforming all, and Discretionary coming in last.
For February 1st, 2016 to February 5th, 2016
As measured by the S&P 500 sector indices, respective performances were: