AdvisorShares Weekly Market Review – Week Ending 4/10/2015
Highlights of the Prior Week
Mexico Enters The Century Bond Business
Volatility decreased last week but equity markets still worked their way higher. The Dow Jones Industrial Average gained 1.65% compared to 1.70% for the S&P 500 and 2.23% for the NASDAQ while the Russell 2000 lagged behind with a lift of 72 basis points perhaps held back by the 4% rally in West Texas Intermediate Crude. Earnings season will of course move into higher gear this week which could be a source of new volatility for markets. Barron’s reports that estimates call for S&P 500 earnings to come in at $27 for the quarter which would be a 4% decline year over year.
All of the major foreign equity markets we regularly follow in this report were higher last week, some with huge moves. The German Dax gained 4.27%, France added 4.05% and the UK was better by 3.46%. In Asia the gains were even more pronounced led by 11.42% for the Hang Seng, 9.30% in Shanghai, 2.57% in Japan and 82 basis points for Australia.
The yield on the US Ten Year Treasury Note backed up five basis points to 1.95%. The German Bund yield dipped slightly to 0.15%, the French OAT now yields 43 basis points, Spanish ten year paper yields 1.23% and in Italy ten years will get you 1.27%. Much was made in the media that Switzerland issued new ten year bonds with a negative yield. Swiss ten years have had a negative yield for months but this week was the first new issue with a negative yield, they closed out the week with a negative yield of nine basis points. Getting slightly less attention is the Spain with its Baa2 Moody’s credit rating issued six month debt last week with a negative yield, -0.002%. Quantitative Easing, ECB style, is helping to push up asset prices but that has yet to show much positive impact on the economy of Europe.
Mexico issued 100 year bonds with a 4.22% yield denominated in euros. Obviously Mexico is taking advantage of the low yield environment, for some context the yield on ten year paper denominated in pesos is 3.27%. The risk to Mexico here is that the euro gets stronger against the peso which would make the debt more expensive to repay. Economist Mike Shedlock notes that the current EURMXP rate is around 16 (16 pesos to buy a euro) but that it has been as low as 22 in recent years. A trip back toward 22 could be problematic.
As mentioned above, oil traded higher last week while gold was generally flat. The US dollar gained 1% against the yen, the euro fell 3.7% against the greenback and the British pound gave up 1.8%.
ETF News & Data
There have been five new funds launched this month and oddly all came this past week on April 9th including a global infrastructure fund that hedges currency and a two-factor, smart beta equity fund.
Fund flows showed a couple of very interesting trades. The Maxis Nikkei 225 ETF had a $1.7 billion inflow on Monday adding to its previous $86 million asset base. There were several currency hedged equity funds on the inflow list as well. The SPDR S&P 500 had another large outflow of $4.8 billion.
So how expensive is it to rent in San Francisco? Apparently professional athletes have been priced out of the market as SFGate reports that Former A’s Player Jeff Samardzija Said ‘No Chance Dude’ To Renting in the city.
“I guess I could have rented a place in San Francisco,” Samardzija told USA Today, “but they were charging like $7,500 for a loft. I was like, ‘No chance, dude.”’ Instead, for apparently less than $7500 a month, he stayed in a series of high-end hotels. “I could write a review on five-star hotels in San Francisco,” he said. “Let’s see, I’d say The Four Seasons was the best, followed closely by the St. Regis. There were a lot of others tied for third place.”
As a bonus, the Huffington Post reports on the 10 Best Doughnut Shops In The US.
ESPN ran a very sad story about former UTEP mens basketball coach Jason Rabedeaux who squandered his success in El Paso and died in the back of a cab in Saigon at the age of 49.
Although many who come to live in Saigon are running away from who they used to be, Jason Rabedeaux was doing the opposite. He wanted his old life back, the life he’d utterly destroyed. In 1999, a young man, just 34, he’d been hired as the head coach at UTEP, replacing the legendary Don Haskins. By 2001, he was named Western Athletic Conference coach of the year.
Source: Google Finance, Yahoo Finance, Wall Street Journal, Bloomberg, Barrons, ETF.com, XTF.com, SFGate, Mish’s Global Economic Trend Analysis, ESPN
Weekly ETF Flows
For April 6, 2015 to April 10, 2015
S&P Sector Analysis
As for the sectors of the S&P 500, five outperformed the broad benchmark – Telecom, Energy, Financials, Materials and Discretionary. The remaining five – Industrials, Technology, Staples, Healthcare and Utilities – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 10.59% this week, with Telecom outperforming all, and Utilities coming in last.
For April 6, 2015 to April 10, 2015