AdvisorShares Weekly Market Review – Week Ending 7/31/2015
Highlights of the Prior Week
A Deceptively Volatile Week
The ink may not quite be dry on that bailout for Greece from the IMF. In a shocking development it turns out Greece has a lot of debt. Technically, Greece doesn’t qualify for a bailout but the IMF may be willing to overlook the technicality if it can get “explicit assurances over debt sustainability.” We hope you enjoyed the two week break from thinking about Greece but the country is back on the front burner again. The equity market in Athens reopened for trading Monday after being closed since June with an initial 30% drop but recovered half of that decline as of the US open.
In other insolvency news Puerto Rico made good on its threat to default, missing a $58 million coupon payment that was due on Saturday.
A lot of attention was given to the shockingly low 0.2% increase in employment costs reported on Friday. It was lowest reading in the history of the series which started in 1982. Reported measures of price inflation continue to be low relative to the Fed’s 2% target and if the Fed does indeed follow through on its stated intention to raise rates this year they will likely be asked to justify the move in light of data points such as this one.
Another data point that will come into focus will be the release of the July Nonfarm Payroll report with estimates calling for 200,000 new jobs expected. The report could either be a validation of the Fed’s intention to raise rates for create more uncertainty and confusion.
Global yields trended lower again last week with the US Ten Year Treasury Note closing at 2.20% after a big drop on Friday after the employment cost news. The German bund yield fell to 0.66%, the French OAT now yields 0.93%, Switzerland couldn’t quite get back to positive territory at -0.01%, Spain now offers 1.89% and for the third week in a row Italy yields less than Spain at 1.80%
Domestic equities traded higher last week. The Dow Jones Industrial Average gained 0.73%, the S&P 500 moved ahead by 1.16%, the NASDAQ added 83 basis points and the Russell 2000 tacked on 1.02%.
The S&P 500 has been between 2040 and 2130 since February 3rd or 126 trading days. While a breakout could be in either direction it does make sense to believe there will be a breakout from that narrow range and a downside breakout is possible and worth preparing for. Domestic markets are now quite far into the second quarter earnings season and Bespoke Investments reports that of the 1370 companies in the S&P 1500, 64.8% have beaten bottom line estimates and the beat rate for the top line stands at 53.4%.
Foreign equity markets were all over the map last week. In Europe the FTSE 100 was strongest rising 1.77%, the CAC 40 added 50 basis points and the DAX fell by 34 basis points. The Nikkei 225 gained 14 basis points, Australia rose 2.25%, the Hang Seng fell 2% and the selling in Shanghai resumed; after an 8% crash last Monday that market eroded another 2% for 10% drop for the week.
Crude oil had a volatile week rising early in the week before a 3% selloff on Friday that left it down 2%. Gold was flat last week dropping 15 basis points, to just below $1100.
ETF News & Data
It was a quiet week for inflows and outflows with no fund exceeding $1 billion. There were a couple of unusual funds making the leader boards including large outflows from consumer discretionary and an inverse VIX fund which is surprising in light of VIX’ recent decline. There were large inflows into biotechnology and the United States Oil Fund also had large inflows but that appear to primarily have been to meet short interest demand.
It was a quiet week for new fund listings with just three funds, all from iShares, all that hedge either currency or interest rate risk and two of which are actively managed.
SF Gate profiled Betty Reid Soskin who works five days a week as a park ranger at the Rosie the Riveter World War II Home Front National Historical Park in Richmond, CA. Her duties include giving 2-3 presentations per week to visitors. Oh, and Ranger Soskin is 93 and has no plans to retire.
Soskin served as a clerk in an all-black trade union during World War II, became a political activist and noted songwriter during the civil-rights movement, and now interprets her wartime experience through her stories. But she is not simply the oldest active ranger in the National Park Service — Soskin helped shape what the park has become, first as a consultant and later as an interpretive park ranger.
Much attention has been paid in the last couple of years to the plight of retired professional athletes who either by virtue of some form of excess or being taken advantage of wind up broke very soon after retiring. Former NBA all star Vin Baker fell into this predicament by virtue of alcoholism and spending beyond his means and finds himself training to manage a Starbucks in Rhode Island.
From the Providence Journal;
“When you learn lessons in life, no matter what level you’re at financially, the important part to realize is it could happen,” he said. “I was an alcoholic, I lost a fortune. I had a great talent and lost it. For the people on the outside looking in, they’re like ‘Wow.’ For me, I’m 43 and I have four kids. I have to pick up the pieces. I’m a father. I’m a minister in my father’s church. I have to take the story and show that you can bounce back. If I use my notoriety in the right way, most people will appreciate that this guy is just trying to bounce back in his life.”
For July 27th, 2015 to July 31st, 2015
As for the sectors of the S&P 500, six outperformed the broad benchmark – Utilities, Industrials, Healthcare Materials, Discretionary, and Telecom. The remaining four – Staples, Technology, Financials, and Energy – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 4.25% this week, with Utilities outperforming all, and Energy coming in last.
For July 27th, 2015 to July 31st, 2015
As measured by the S&P 500 sector indices, respective performances were: