AdvisorShares Weekly Market Review – Week Ending 4/13/2017
Highlights of the Prior Week
President Trump had some interesting comments mid-week that moved markets. He now says China is not a currency manipulator, he thinks the dollar is a little too strong, he likes lower interest rates and is now considering asking Fed Chair Janet Yellen to sit for another term when her current term is up in early 2018. The euro moved up slightly against the dollar and dollar fell almost 2% against the yen with most of the moves coming in the immediate aftermath of Trump’s comments. The yield on the Ten Year US Treasury Note fell 15 basis points last week to 2.23% which continues the trend of curve flattening which is not good for among other things, the banks. This might help explain why the larger financial sector ETFs were down more than the broad market last week and are lagging far behind the S&P 500 year to date.
Expanding on current political developments, Barron’s devoted real estate in multiple columns to what in some cases are “head-snapping” reversals. The Trump Trade, also called the Reflation Trade began to flatten out shortly before the Congress failed to repeal and replace the Affordable Care Act and has been trending gently lower since early March. There is history that supports markets going higher in the face of political gridlock but the current action might be the market struggling as a new President tries to manage a relatively (relative to previous new Presidents) steep learning curve.
Whether it was due to the Trump comments that sent the dollar lower (probably) or the ongoing and escalated tensions in the Middle East as well as the Korean peninsula (maybe) or something else, gold has caught a bid rallying 2.63% getting close to $1300 and trading above its 200 day moving average for the first time since November. The 200 day moving average (DMA) is viewed as being a significant technical indicator. Our take on this is that the 200 day moving average is a signal for the health of demand for an asset. When the price is above the 200 DMA, demand can thought of as being healthy regardless of whatever else is going on in the world. Likewise, when price is below the 200 DMA demand is unhealthy. While the consequence for gold’s unhealthy demand over the last few months was negligible, the recent trading represents an improvement.
Much has been made of the woeful underperformance of the retail group this year with the large ETF tracking the group down mid-single digits compared to mid single digit gains for the consumer discretionary sector at large and the S&P 500 more broadly. We are are hearing more and more commentary saying that bricks and mortar is at a critical turning point as discretionary spending moves online. This has been reflected in equity prices as well as for prices in the high yield bond market and the floating rate loan market which are common ways for retailers to access capital.
For the shortened week, the Dow Jones Industrial Average dropped 0.97%, the S&P 500 fell 1.12%, the NASDAQ gave up 1.21% and the Russell 2000 again brought up the rear, down 1.36%.
Barron’s reported on a new set of standards coming that are intended to protect investors from funds that might have some not so obvious threats related to underlying liquidity and indexes that might be too concentrated. This is perceived as more of a threat to narrow based indexed products than anything else. Actively managed funds can simply reposition their way to compliance and broad based indexes are by definition not too concentrated. For now there is not much detail.
We typically avoid financial content in this section but we found not an interesting, but fascinating profile of Scott Minerd of Guggenheim Partners in Bloomberg; The $260 Billion Portfolio Shaped By Bodybuilding, Scripture and Slow Thinking.
Minerd had two conditions: He would retain his autonomy and remain in California, his home since walking away from trading. Soon, Liberty merged with the family office of 19th century mining baron Meyer Guggenheim’s heirs, transforming the little-known investment house into Guggenheim Partners, a boutique asset manager.
From The Undefeated; Hank Aaron Wants To Be Remembered For More Than Home Runs;
The Hall of Fame right fielder and his wife, Billye, have spent two decades building a philanthropic legacy that began with paying extracurricular activity and equipment fees for needy grade school students and now includes college scholarships and a multimillion-dollar grant to the Morehouse School of Medicine.
Source: Google Finance, Yahoo Finance, Wall Street Journal, SeekingAlpha, Bloomberg, Ycharts.com, Reuters, Barrons, ETF.com, XTF.com, Bespoke Investment Group, CME Group, Washington Post, The Undefeated
S&P Sector Analysis
As for the sectors of the S&P 500, six outperformed the broad benchmark – Staples, Utilities, Telecom, Healthcare, and Discretionary. The remaining five – Technology, Industrials, Energy, Materials, and Financials – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 3.95% for the week ending 4/13/17, with Real Estate outperforming all, and Financials coming in last.
For April 10th, 2017 to April 13th, 2017
As measured by the S&P 500 sector indices, respective performances were: