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Posted by on Apr 10, 2017 in ETF Strategist, Market Insight

AdvisorShares Weekly Market Review – Week Ending 4/7/2017

AdvisorShares Weekly Market Review – Week Ending 4/7/2017

Highlights of the Prior Week

Blame It On The Rain

Macro

In what has to be the most expected jobs disappointment ever, there were only 98,000 jobs created in March and the previous two months were reduced by 38,000. Estimates for March were for 175,000 jobs but a weather-related shortfall was widely accepted and played out in the number. The headline unemployment rate printed at 4.5% while the broader U6 came in at 8.9% and the labor force participation reported at 63.0% all thanks to a relatively good household survey. Wages were consistent with recent months, showing a gain of 0.2% and 2.7% year over year.

The jobs report contributed to but did not hasten the ongoing decline in the yield of the Ten Year US Treasury Note which closed the week at 2.37% although traded down to 2.32% on Friday. Mark Yusko, CEO of Morgan Creek Capital weighed in on the drop in yields, tying it to the realization that Q1 GDP will be close to 1% and that it is mathematically impossible for it to print at the 4% that has been baked into President Trump’s planning

On Thursday night the US launched 59 missiles in a “targeted attack” on Syria for use of chemical weapons. This of course a complicated situation in terms of not getting congressional approval or what the fallout could be and we encourage everyone to take the time to learn more but the most succinct take into the President’s mindset (right or wrong) we found came from Vox as follows; Trump’s justification for launching the strike isn’t to end the Syrian civil war, or even to slow down Assad’s killing of his country’s civilians. It is a “targeted” strike designed as punishment for one specific crime: the use of chemical weapons.

Recapping the week for domestic equities ahead of earnings season, prices were lower across the board. The Dow Jones Industrial Average fell three basis points, the S&P 500 gave up 0.30%, the NASDAQ slid 0.56% and the Russell 2000 brought up the rear dropping 1.56%

From the something you don’t see everyday department, Richmond Fed President Jeffrey Lacker resigned last week as revelations came to light that he provided confidential information to a Wall Street analyst in 2012. Basically he shared content of Fed minutes at a conference the day before the minutes were made public. It is being viewed as more of an inadvertent slip than anything else but did hasten his “retirement” which had been scheduled for October.

Another unusual nugget came from the FOMC minutes that were released. Apparently “some participants viewed equity prices as quite high relative to other risk assets, such as emerging market stocks, high yield corporate bonds and commercial real estate.” We have acknowledged before that valuations are rich but not that far above the long term average PE ratio which for the S&P 500 currently resides just under 19 as opposed to the mid-50’s which is where the Nikkei was in the late 1980’s. While the next bear market could start at anytime for just about any reason, it won’t be because the market’s PE ratio is a couple of points above its long term average.   

In news that harkens back a little over two years ago when the Swiss National Bank depegged the franc versus the euro, the Czech National Bank depegged the koruna from the euro, removing the floor. The cross is quoted as EURCZK so this move allows the euro to drop against CZK if that is where the market takes it which seems likely as it fell 1.6% on Thursday when the news hit. Bespoke Investment Group had a funny quote noting that “this floor removal looks nothing like the chaos of the SNB’s in 2015” because the CNB effectively telegraphed the move. We don’t mention the Czech Republic very often but it is an interesting investment destination that we will try to explore in a later commentary but for a little context its 10 Year Note yields just 1.02%, it rose eleven basis points on the currency news.  

ETF News

Horizons ETFs, one of the larger providers in Canada with a small presence in the US, launched the Horizons Medical Marijuana Life Sciences ETF that trades on the Toronto Exchange. The holdings mainly consist of small companies that include some version of the word cannabis in their names which is not a surprise but we also found a fertilizer company in there as well.

Factset Data reports that a record $135 billion flowed into ETFs in the first quarter. For context, the Q1 2016 number was just under $30 billion. Breaking it down a little further, $58 billion went to domestic equity, $38 billion to international equity and $31 billion to fixed income.

Interesting Reads

Maybe more ironic than interesting, but the Kentucky Coal Mining Museum In Harlan County Switches To Solar Power;

Not much about the Kentucky Coal Mining Museum screams modern. Its website — nay, websites — boasts early 1990s Web design, and its advertisement on YouTube appears to have been shot on a handheld camcorder. It sits next to City Hall on Main Street, the only thoroughfare of Benham, Ky. That’s to be expected from a museum dedicated to an old form of energy, which is what makes its own power methods so interesting.

Sports

What started out as a sad story might have turned around in spectacular fashion as Ex-Dodgers Star Pedro Guerrero Wakes From Coma In ‘Miracle’ Recovery after having a massive stroke.

Guerrero woke up from his coma around 7 a.m. ET in Lenox Hill Hospital in Manhattan, surprising relatives and his wife, who thought he would never regain consciousness. He received phone calls from friends, including one from Leonel Fernandez, the former president of the Dominican Republic. Guerrero’s recovery is remarkable, to say the least. In fact, Guerrero’s wife told ESPN that doctors initially wanted her to sign a document declaring her husband dead, but she refused. “It is a miracle that Pedro is alive, completely conscious and speaking clearly two days after a doctor basically declared him brain dead,” Guerrero’s wife told ESPN. “This is a miracle.”

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, NESN
 

 
S&P Sector Analysis

As for the sectors of the S&P 500, eight outperformed the broad benchmark –Real Estate, Energy, Materials, Utilities, Staples, Industrials, Healthcare, and Telecom. The remaining three – Technology, Discretionary, and Financials – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 1.57% for the week ending 4/7/17, with Real Estate outperforming all, and Financials coming in last.

For April 3rd, 2017 to April 7th, 2017

As measured by the S&P 500 sector indices, respective performances were:

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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