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Posted by on May 28, 2014 in Investment Perspective

AdvisorShares Weekly Market Review – Week Ending 5/23/2014

AdvisorShares Weekly Market Review – Week Ending 5/23/2014

Highlights of the Prior Week

Macro

The S&P 500 had a strong week rising 1.2% and of course notching its first close above 1900 as it made a new high. The small cap Russell 2000 Index continued its trend of being more volatile by finishing the week with a 2.1% gain but dropping more than the S&P 500 on Tuesday; 24 basis points versus 81 basis points.

The current bull market, some call it the most hated bull market in history, continues to confound the skeptics and market historians alike. There’s a lot that is not right with this bull market but obviously that has not mattered.

Although the market continues to go up no one should expect that market cycles have been repealed. The current bull is long in the tooth and while we have no intention of trying to predict market cycles we believe it is important to point out risks and signs of bull market weariness because an ongoing bull poses no threat to your clients’ financial futures but bear markets do.

Foreign Markets

We’ve not looked at foreign markets for the last couple of weeks because very little has been happening. Of the seven major foreign markets we follow only Germany, the Hang Seng and France have moved more than 1%. The UK, Japan, Australia and Shanghai have moved by less than 1%. These limited moves are not surprising as the S&P 500 has gone up by 1.2% in that same time period but there has been very little to talk about in foreign markets during that time.

On that note, Jason Zweig of the Wall Street Journal early last week wrote about foreign markets, citing research that foreign markets are cheap these days but have generally been forgotten, or better yet simply ignored due to several years of lagging behind domestic equities.

At some point foreign equities will rotate back into favor and although no one can know when this will happen, that foreign has lagged for years, is cheaper and somewhat ignored could be a compelling set of reasons to look at foreign allocations.

ETF News & Data

There were just two new ETFs launched last week continuing the recent trend of relatively few new funds. The Merk Gold Fund (NYSEARCA: OUNZ) allows holders to redeem shares for physical gold. The other new fund was the db-X trackers Harvest CSI 500 China A-Shares Small Cap Fund (NYSEARCA: ASHS) which is the latest ETF to tap into the previously unaccessible China A-share market.

Fund flows were noteworthy this week. The iShares 7-10 Year US Treasury Bond ETF (NYSEARCA: IEF) saw inflows of $3.3 billion which was by far the most for any fund and the SPDR S&P 500 (NYSEARCA: SPY) was the leader by far in outflows at $4.2 billion. The creations in IEF are all the more noteworthy because the fund’s total assets are only $9.7 billion. We will be curious to see if it goes right back out as perhaps this might be an manager parking cash or making some other form of short term trade.

Interesting Reads

Time Magazine posted 25 colorized pictures taken before and after D-Day which of course was June 6, 1944. The technology to colorize pictures has come along way as most of them look like they could have been taken with a smart phone.

With the advent of Instagram and other apps we’ve all become more interested in taking pictures which makes this sort of feature all the more fun to look at.

Sports

The Seattle Seahawks showed remarkable kindness to Garrett Scott, their 6th round draft choice from Marshall. After being drafted, a physical examination revealed a heart condition that sadly will end Scott’s career before it starts.

The Seahawks though, upon learning of Scott’s heart condition signed him to a contract and waived him the following day with the non-football illness designation. The particulars of this sequence of events mean that Scott gets his first year salary which Yahoo Sports reported as being $555,000 plus his signing bonus.

There was not much detail on what is precisely wrong with Scott or whether this is immediately life threatening (we hope not) but the gesture is remarkable and while the dollars involved are not large by professional sports standards the sum is huge for the typical kid right out of college looking to start what will hopefully be a long life.

Roger Nusbaum, AdvisorShares ETF Strategist

 
Source: Google Finance, Yahoo Finance, ETF.com, Barron’s, XTF.com, BloombergBusinessweek, Wall Street Journal, Yahoo Sports
 
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Weekly ETF Flows

For May 19, 2014 to May 23, 2014

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Shares outstanding include totals as of current day NAV.
 

S&P Sector Analysis

As for the sectors of the S&P 500, five outperformed the broad benchmark – Technology, Discretionary, Healthcare, Materials, and Financials. The remaining five – Energy, Industrials, Staples, Utilities, and Telecom – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 3.47% this week, with Technology outperforming all, and Telecom coming in last.

For May 19, 2014 to May 23, 2014

Sector performances, as measured by the S&P 500 sector indices were:

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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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