AdvisorShares Weekly Market Review – Week Ending 7/15/2016
Highlights of the Prior Week
So Now Brexit Is Good For Markets?
The title to this week’s update is meant to be tongue in cheek as we suspect that beyond the kneejerk/snapback cycle a couple of weeks ago, the US markets are not being influenced by what Brexit will or won’t be and may not be so influenced for quite a while yet, if ever. Even European equity markets worked their way higher despite the acceptance and the unknowns.
The Dow Jones Industrial Average was up 2.02%, the S&P 500 gained 1.48%, the NASDAQ was good for 1.44% and the Russell 2000 chipped in with 2.39%. From the Brexit low on June 28th the US markets have rallied 8-10% leading to the unusual condition of all ten S&P 500 sectors being overbought, per Bespoke Investment Group. After so much so quickly it should not be a surprise if the markets take something of a breather. We would also note the very low level for VIX which closed Friday at 12.56. VIX traded very briefly above 26 during the immediate Brexit panic.
Internationally, the Dax in Germany gained 4.54%, the CAC 40 added 4.2% while the FTSE 100 moved ahead by a more modest 1.19%. Asian markets were also strong as the Shanghai Composite rallied 2.22%, the Nikkei 225 tacked on 9.21% (likely due to election results that validated Shinzo Abe which in turn led to a huge rally in the dollar against the yen) followed by 5.33% for the Hang Seng and 3.81% for the ASX 200.
Sovereign yields dialed back the Brexit panic some, as equities rose. The yield on the US Ten Year Treasury Note moved dramatically higher to 1.59% (think about that for a moment), the German bund pulled itself out of negative territory to a positive six basis points, the French OAT moved up to 0.23% and the UK gilt now pays 0.83%. The negative yielders that we regularly follow here, Japan and Switzerland now charge 0.22% and 0.54% respectively.
West Texas Intermediate Crude took back some of its recent decline adding 2.71% to close Friday at $46.28. In the face of a strong equity market gold fell 2.33%.
On Friday there was a coup attempt in Turnkey and for all the coverage on the matter the most concise explanation came from Bespoke Investment Group who said it was too small to succeed but too big to have been staged by President Erdogan as a means to solidify his own power. One cynical tweet that we saw joked that it must be a CIA manufactured coup because it took place after the close of US equity trading.
XTF.com reported nine new funds last week including a socially conscious fund from Global X and three funds from Velocity Shares that use various VIX overlay strategies.
ETF.com reported a strong with for fund flows with a net increase of $20 billion with about 2/3rds of that flow going into domestic equity funds which is consistent with markets making new highs.
With the latest Pokemon Go craze Wimp.com reminds us that What Hiking Does To The Brain Is Pretty Amazing;
Hiking is a pretty solid aerobic exercise that burns around 400-700 calories per hour. This is great on its own, but aerobic exercise also has a really positive effect on your brain: it improves your memory. It’s even being studied as a way to help seniors fight off dementia, because it doesn’t just increase your ability to store information, it also reduces memory loss. Outdoor activity has also been shown to improve grades, so it’s a pretty solid choice all around for juicing your grey matter.
In case you missed it on Thursday a Crash Near The Finish Throws The Tour De France Into Chaos after stage 12.
Porte smashed face-first into transmission equipment on the back of the motorbike. Bauke Mollema, who was also with Porte and Froome, cartwheeled into the air. Froome hit the ground on the other side of the motorcycle, out of its camera’s sight, with Mollema ending up on top of him. Adding to the confusion, a large police motorcycle then ran over Froome’s Pinarello bicycle, breaking it. Immediately on the scene were mechanics who provide service to riders when their team cars are not nearby. But they were traveling by motorcycle and had only spare wheels to offer.
Source: Google Finance, Yahoo Finance, Wall Street Journal, SeekingAlpha, Bloomberg, Reuters, Barrons, ETF.com, XTF.com, Bespoke Investment Group, wimp.com, New York Times
S&P Sector Analysis
As for the sectors of the S&P 500, five outperformed the broad benchmark – Materials, Financials, Industrials, Technology, and Energy. The remaining five – Healthcare, Telecom, Discretionary, Staples, and Utilities – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 4.96% this week, with Materials outperforming all, and Utilities coming in last.
For July 11th, 2016 to July 15th, 2016
As measured by the S&P 500 sector indices, respective performances were: