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Posted by on Jul 7, 2014 in Market Insight

AdvisorShares Weekly Market Review – Week Ending 7/4/2014

AdvisorShares Weekly Market Review – Week Ending 7/4/2014

Highlights of the Prior Week

Macro

The big news last week as the S&P 500 added 1.25% and the Dow Jones Industrial Average crossed 17,000 for the first time as both indexes made new highs was the jobs report which came out on Thursday due to the holiday. The number of jobs created came in at 288,000 which was much higher than the estimated 211,000 and the headline unemployment rate dropped to 6.1% from 6.3%. The broader U-6 number also ticked down to 12.1% and the labor force participation rate held steady at 62.8%.

A little further below the surface, Barron’s reported that “part-time employment jumped by one million while full-time employment fell by 523,000.” It is statistics like these that cause people to doubt the recovery and the bull market.

A couple of market-related stats also from Barron’s that are worth noting; the S&P 500 has been above its 200 day moving average for 400 consecutive trading days which is the second longest such streak in 50 years and the current S&P 500 level of 1985 is still below the inflation-adjusted all time high (in 2014 dollars) of 2073 reached in 2000.

The new highs in the indexes brought new lows in the CBOE Volatility Index (VIX) with a close of 10.32 last Thursday and the news from the jobs report sent the yield on the US Ten Year Treasury Note up to 2.64% after starting out the week at 2.52%.

Foreign Markets

The US equity rally spread to foreign markets as well The FTSE 100 had a strong week rising 1.6%, that DAX had an even stronger 1.98% and the CAC 40 was up 72 basis points. In Asia the Nikkei 225 up 1.8%, the ASX in Australia was up 1.46%, the  Hang Seng Index rallied 1.4% and the Shanghai Composite saw a 1.12% lift.

Investors complained about correlations going to 1.00 during the financial crisis when almost everything was going down but there are unlikely to be such complaints as long as markets keep rising. This potentially becomes an important talking point with clients. They will expect their advisors to have a plan for portfolio protection for whenever the next bear market occurs and if foreign exposure won’t be effective they will want exposure to other types of tools that could be.

ETF News & Data

The holiday shortened week meant very little activity in the ETF industry last week although new fund provider Compass EMP launched its first three funds with two more appearing to be in the pipeline and ready to launch soon as well. The Compass Funds all involve fundamental screening and volatility screening and a couple of them can take defensive action based on certain market conditions.

Obviously there is no way to know whether these funds, or any new funds for that matter,  will find an audience but increasingly the new funds being target some sort of outcome or specific portfolio effect that may not be captured in older market cap weighted funds. As one executive from a mid-sized ETF provider shared with us last year “our clients don’t need us to create our own S&P 500 fund.”

Interesting Reads

Have you ever wanted to be the mayor or fire chief of your town? Or both? The town of Swett, South Dakota is for sale for $400,000. The town includes a home, a bar and some equipment. It is a couple of hours southeast of Rapid City which means it gets very hot in the summer and there was no mention of who plows the roads in the winter.

Sports

The sports world converged in the UK over the weekend for a flurry of second tier, but exciting nonetheless, sports. The anonymity in women’s tennis continues as Petra Kvitova from the Czech Republic won her first major title. The men’s championship featured two familiar names with Novak Djokovic beating Roger Federer in five sets.

The first three stages of this year’s Tour de France are in the UK as well, only the second tour to ever have stages in England. NBCSN had six hours of live coverage on both Saturday and Sunday which may have proved to have been too much. Well known British sprinter Mark Cavendish crashed out of the Tour right before the finish line of stage after he leaned into rival Simon Gerrans

Finally the British Grand Prix was run at Silverstone Circuit in Northamptonshire and won by Mercedes’ driver Lewis Hamilton. Grand Prix Formula 1 racing offers several alluring attributes from beautiful cars, especially the cars from the 1950’s and 1960’s and the extremely wide variation in speeds. Some Grand Prix races, like in Monte Carlo, are run through city streets which creates some amazing camera shots and makes for very interesting viewing beyond the race dynamics.

 

Roger Nusbaum, AdvisorShares ETF Strategist

 
Sources: Google Finance, ETF.com, Barron’s, Yahoo Finance, Wall Street Journal, NY Times, Country Living, The Guardian
 
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Weekly ETF Flows

For June 27, 2014 to July 4, 2014

2014.7.7_pic 2

Shares outstanding include totals as of current day NAV.

2014.7.7_pic 3
 

S&P Sector Analysis

As for the sectors of the S&P 500, five outperformed the broad benchmark – Healthcare, Discretionary, Technology, Materials and Financials. The remaining five – Staples, Telecom, Industrials, Energy and Utilities – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 5.25% this week, with Healthcare outperforming all, and Utilities coming in last.

For June 27, 2014 to July 4, 2014

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

2014.7.7_pic 4a

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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