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Posted by on Jun 13, 2016 in ETF Strategist, Market Insight

AdvisorShares Weekly Market Review – Week Ending 6/10/2016

AdvisorShares Weekly Market Review – Week Ending 6/10/2016

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Highlights of the Prior Week

Rate Hike This Week Off The Table (probably…)

Macro

Last week was a rough one for capital markets in terms sentiment. Billionaire after billionaire (Soros and Gross et al) made headlines with bearish outlooks for equities with George Soros appearing to load up on gold. In conjunction with pessimistic chatter was a buying panic of sorts in sovereign debt, most notably the German bund which now has a yield of two basis points. The UK gilt is also at an all time low of 1.23% as the odds of the Brexit increase. Barron’s believes global markets would “freak out” if the Brits vote to exit. The Swiss ten year note plunged to -0.45% and Japan’s JGB charges 14 basis points. The Ten Year US Treasury Note has not been left behind, its yield fell to 1.64%, lower than where it was during the February panics in oil and equities, thanks in part in record foreign demand.

Last week, markets considered a rate hike in July as being a certainty but now there is a growing belief that July is actually off the table. In this commentary we have consistently expressed disbelief as to how the Fed would be able to successfully justify its stated intention. The CME’s countdown to FOMC page now gives a 22.5% chance of a hike in July (hat tip to Barron’s for mentioning this website).  

Domestic equities started strongly but rolled over to a mixed close. The Dow Jones Industrial Average gained 0.34%, the S&P 500 fell 0.14%, the NASDAQ was off 0.96% and the Russell 2000 was exactly flat.

Foreign equities were mixed last week. Europe was lower with the DAX falling 2.66%, the FTSE 100 giving up 1.45% and the CAC 40 dropping 2.57%. Moves in Asia were much smaller as the Shanghai Composite dipped 36 basis points in a three day week, the Hang Seng gained 0.48%, the Nikkei gave back 0.30% and the ASX 200 had a 13 basis point decline.

West Texas Intermediate Crude was strong through Wednesday getting above $51 before falling 4% on Thursday and Friday to end the week with a modest loss at $48.95. Gold had a strong week getting as high as $1280, consistent perhaps with the sharp drop in yields. Gold is typically thought of as a hedge against inflation but there is a case for gold as a deflationary hedge when the metal is thought of as a currency. Certain currencies are perceived as being safer than others and draw buying demand in times of uncertainty including when uncertainty revolves around deflation, and currency debasement, which is one issue of the day with so many countries pursuing negative interest rate policies. A lot of people last week were bemoaning the fact that there is $10 trillion in debt outstanding with a negative yield.

Monday brought news of a huge merger that marries very established tech with web 2.0. While at $26 billion it is a large merger, what makes it huge is the headline value and it will be interesting to learn more about how it came together and what impact it might have on the tech sector in the near future.

ETF News

There were nine new funds launched last week including two actively managed ETFs from Riverfront as well as a suite of narrowly focused health ETFs from Janus.

Fund flows were led by risk-on assets like emerging market equities and high yield debt with both segments bringing in close to $1 billion.

Interesting Reads

Remember the hyperinflation in Zimbabwe? The Cato Institute reports that The Correct Number Is 89 Sextillion Percent.

In reality, Zimbabwe’s annual inflation rate in September 2008 was 471 billion percent, not 500 billion percent. More importantly, Zimbabwe’s hyperinflation peaked in November, not September. It was then that Zimbabwe recorded the second-highest hyperinflation in history: a whopping 89.7 sextillion percent. This is 179 billion times greater than the IMF’s figure.

Sports

Sean Rooks sadly was the latest retired NBA big man to pass away at an early age and The Undefeated reports The NBA Seeks To Address Spiking Problem With Heart Disease;

Hall of Fame center Moses Malone, 60, died on Sept. 13, 2015, of heart disease. Former NBA forward Darryl Dawkins, 58, died on Aug. 27, 2015, of a heart attack. Former journeyman center Jack Haley, 51, died of heart disease on March 16, 2015. Former NBA forward Anthony Mason, 48, died on Feb. 28, 2015, weeks after having a massive heart attack. Former NBA and ABA forward Caldwell Jones, 64, died after suffering a heart attack on Sept. 21, 2014.

Source: Google Finance, Yahoo Finance, Wall Street Journal, SeekingAlpha, Bloomberg, Reuters, Barrons, ETF.com, XTF.com, FactSet, BBC, Bespoke Investment Group, Cato Institute, The Undefeated

2016.06.13_Table1

For June 6th, 2016 to June 10th, 2016

2016.06.13_Table2

S&P Sector Analysis

As for the sectors of the S&P 500, six outperformed the broad benchmark – Telecom, Energy, Staples, Utilities, Industrials, and Materials. The remaining four – Technology, Healthcare, Discretionary, and Financials – each underperformed.  The dispersion between the top-performing and bottom-performing sectors was roughly 4.29% this week, with Telecom outperforming all, and Financials coming in last.

For June 6th, 2016 to June 10th, 2016

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

2016.06.13_Table3

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