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Posted by on Jun 10, 2014 in Market Insight

AdvisorShares Weekly Market Review – Week Ending 6/6/2014

AdvisorShares Weekly Market Review – Week Ending 6/6/2014

Highlights of the Prior Week

Macro

The trends of higher equities prices and lower volatility continued last week as the S&P 500 melted up by 1.34% while the CBOE S&P 500 Volatility Index known more commonly as VIX closed out the week with a 5.35% decline taking it below 11 for the first time since 2007. It would have been up on the week were it not for Friday’s more than 7.5% decline.

Whatever fear that sent the yield on the Ten Year US Treasury Note below 2.5% in late May appears to have receded as the yield went back up toward 2.6%, putting it more in line with the lower end of trading range it has had for most of the year.

The first Friday of the month of course delivered the monthly non-farm jobs report which for May registered a gain of 217,000 new jobs and a steadying of both the unemployment rate at 6.3% and the labor force participation rate at 62.8%. The U-6 reading on unemployment which takes into account other factors including people working part time but who would prefer to work full time downticked to 12.2%.

Foreign Markets

As predicted on a recent AdvisorShares Alpha Call by Mark Macqueen of Sage Advisory, the European Central Bank (ECB) increased its accommodative stance in an effort to stave off deflation and goose economic activity. Thursday the ECB announced it was cutting the primary lending rate to 0.15% from 0.25% and that it would charge commercial banks 0.1% on overnight deposits with the central bank. This penalty, or negative interest rate is obviously intended to induce the banks to lend that money out instead of parking with the ECB.

Similar to the US, economic activity on the ground tells a different story from asset prices which have gone up. This is all of course a lingering effect from the global financial crisis from 2008 and if it was as big as “they” said it was then it should be no surprise that the world economy is still trying to dig out from under that event and that the world economy still has many years of digging out ahead of it.

ETF News & Data

Last week there were seven new ETFs that started trading, more than in many recent weeks. iShares brought three international minimum volatility funds and State Street launched three so called smart beta funds targeting various slices of foreign markets. State Street also launched a small cap ETF focusing on Europe.

Every week in this space we look at inflows and outflows of ETFs and for the first time since we have been tracking this, there were no funds seeing creation/redemption activity greater than $1 billion. The largest on either side of the ledger was $770 million leaving the iShares 1-3 Year Credit Bond ETF (NYSEARCA:CSJ).

Interesting Reads

Has the entire tattoo craze happened without you and you still don’t get it, wondering what it’s all about and whether people ever regret their choices? Well it turns out that “tattoo regret” is becoming a big business. According to a Harris poll, 37% of people regret their tattoos after about 14 years. This Bloomberg article tells the story including that of a 35 year old woman who has spent $2000 to remove a tattoo she got 17 years ago for $150. An investment theme may very well emerge here soon if it hasn’t already.

Sports

Professional tennis’ popularity all but disappeared in the last few years perhaps because of a lack of American stars or maybe the stars of the sport are less compelling than Sampras, Agassi, McEnroe or even Ivan Lendl or maybe there is some other reason but no matter why, the accomplishment of Rafael Nadal winning five straight French Opens (nine for his career now) is a remarkable achievement eclipsing Bjorn Borg who won four consecutive French Opens from 1978-1981 among his 11 major titles.

 

Roger Nusbaum, AdvisorShares ETF Strategist

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

For June 2, 2014 to June 6, 2014

2014.6.10_pic 2

Shares outstanding include totals as of current day NAV.

2014.6.10_pic 3
Shares outstanding include totals as of current day NAV.
 

S&P Sector Analysis

As for the sectors of the S&P 500, four outperformed the broad benchmark – Financials, Industrials, Discretionary, and Energy. The remaining six – Materials, Technology, Utilities, Healthcare, Staples, and Telecom – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 3.45% this week, with Financials outperforming all, and Telecom coming in last.

For June 2, 2014 to June 6, 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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