AdvisorShares Weekly Market Review – Week Ending 3/11/2016
Highlights of the Prior Week
Heavy Handed Central Banks
The party for domestic equities continued last week while foreign equity markets were mixed. One big story from Thursday was news of increased accommodation by the European Central Bank (ECB) which announced it will increase its monthly asset purchases by 33% and it took its overnight rate further into negative territory. This triggered an immediate reaction Thursday of higher equity prices and a decline in the euro which then reversed in a manner of hours when ECB President Mario Draghi said that rates were unlikely to move lower.
Barron’s devoted a lot of real estate to recapping recent central bank actions including how many times the FOMC might raise rates this year. Central Bank policy has of course always been a very important ingredient in the capital markets recipe but in the last few years news of hikes, decreases, ZIRP and now NIRP (negative interest rate policy) has had undue influence on markets to the point of analysts trying to quantify how much of the run since the low seven years ago can be attributed to the Fed (a Yahoo Finance headline proclaimed 93% of the gain was caused by the Fed).
The current interest rate environment of course stems from the financial crisis that started in 2008. Arguably the first warning shots of the crisis were in 2006. It should be no surprise that years after the fact, we are still living with the overhang of desperate policy enacted to stimulate growth and we are likely to still be having similar conversations ten years from now. This is not necessarily a negative but such heavy central bank reliance is not a positive dynamic.
Domestic equities could have been helped by West Texas Intermediate Crude which rallied 5.11%. The Dow Jones Industrial Average gained 1.18%, the S&P 500 added 1.09%, the NASDAQ was up 0.67% and the Russell chipped in with a 52 basis point advance.
The DAX eked out a 7 basis point lift, the CAC 40 tacked on 0.81%, the FTSE 100 dipped 0.96%, the Shanghai Composite gave back 2.22%, the Hang Seng added 11 basis points while the Nikkei 225 fell 0.45%.
Gold dipped modestly on the week but more interesting was the 24% jump in iron ore on Monday. Barron’s attributed the jump to an upcoming flower show in China. Seriously. The big idea is that to improve air quality in the city hosting the show, production would be suspended until after the show later this spring. The amount of production taken off line is actually significant relevant to total global output.
ETF News & Data
XTF.com reports four new funds coming out last week including a fund targeting drones and another targeting video games from PureFunds who have a popular ETF already that focuses on internet security.
Fund flows were a mixed bag with no discernable pattern. Certain risk assets had large inflows like emerging market equities and small cap stocks but high yield debt and ETPs tracking crude oil had large outflows. There were also bond funds on both sides of the ledger adding up to a directionless week.
Higher Perspectives reports that Scientists Believe They Have Just Discovered A Parallel Universe. A mind bending science quote;
Once a universe begins in a big bang type setting, it never stops expanding. That goes for all the universes. So it makes sense they’d periodically bump into one another. They’re all likely in a row, say researchers, vibrating, bouncing around, and rubbing up on each other. Dr. Chary believes that the signal he’s received indicate that this other universe is extremely different from our own. He says it could have a ratio of subatomic particles called photos and baryons that are about 10 fold greater than in our universe.
Anyone who is a fan of NASCAR or Indy Car racing may want to check out the world of off road racing. In previous Market Updates we’ve featured the Dakar Rally which happens every January but there are other great races including the Baja 1000 which runs in Mexico and the Mint 400 which ran over the weekend near Las Vegas. The Las Vegas Review-Journal recapped the event with an amazing photo essay.
Source: Google Finance, Yahoo Finance, Wall Street Journal, SeekingAlpha, Bloomberg, Reuters, Barrons, ETF.com, XTF.com, Bespoke Investment Group, Higher Perspectives, Las Vegas Review-Journal
For March 7th, 2016 to March 11th, 2016
S&P Sector Analysis
As for the sectors of the S&P 500, five outperformed the broad benchmark – Utilities, Materials, Energy, Healthcare, and Telecom. The remaining five – Technology, Financials, Staples, Discretionary, and Industrials – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 1.77% this week, with Utilities outperforming all, and Industrials coming in last.
For March 7th, 2016 to March 11th, 2016
As measured by the S&P 500 sector indices, respective performances were: