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Posted by on Aug 21, 2017 in ETF Strategist, Featured, Market Insight

AdvisorShares Weekly Market Review – Week Ending 8/18/2017

AdvisorShares Weekly Market Review – Week Ending 8/18/2017

Highlights of the Prior Week

Don’t Look Directly At The VIX  

Macro

For months we have marveled at the extent to which political volatility did not lead to equity market volatility. The VIX has spent much of 2017 hovering around 10 even breaching 9 for a very short time. This relationship may have started to change last week amid the fallout from the protests/clashes the previous weekend in Charlottesville as advisory councils were disbanded, there was turnover in senior White House leadership and at least two GOP Senators making public comments that were not supportive of President Trump. Friday after the close, news broke that Carl Icahn was stepping down from his role as special adviser to the President to “avoid ‘partisan bickering’ about his position.” While the VIX index actually dropped slightly on the week and the selling was limited to Thursday things seemed to just feel more volatile.

For the week the Dow Jones Industrial Average fell 0.84%, the S&P 500 declined 0.64%, the NASDAQ gave back 0.65% and the Russell 2000 was down 1.07%.

There are divergent forces at play with how consumers engage the economy to, well, consume. On the one hand the University of Michigan Consumer Sentiment Survey came in on Friday at its highest reading since January of this year. On the other hand there has been carnage in the retail group as the earnings season winds down. In addition to the athletic apparel retailer that dropped 28% on Friday there were several old line (brick and mortar) retailers that also had meaningful declines on the week. When the dust settled, the large retail group ETF had fallen 3.68%. For a little more context that same retailer fund is down 14% for the year versus a 7% gain for the S&P 500 on a price basis.

Of course this has all been to the benefit of several online retailers who often win on price and convenience. The efficiency gains from the online retailers are a deflationary force among others at work in the US economy. We’ve been studying this for a while, a deflationary debt spiral (where asset prices quickly fall below the amount borrowed), which was feared eight-ten years ago, is not the a likely outcome but sluggish growth, a lack of inflation and ongoing under employment would be a reasonable expectation. If this plays out, then it does support the notion of lower for longer in the interest rate market. Right on cue, the yield on the ten year US Treasury Note was up one basis point on the week to 2.19%.
The Streetwise Column in Barron’s had some bearish nuggets to chew on including that only 50% of the S&P 500 components are now above their 200 day moving averages compared to 2/3rds back in July, new highs were trailing new lows 47 to 268 last Friday and that the S&P 500 has made 30 new highs this year but is only up 1.2% since March 1st. We are sharing these glass half empty observations because a continued rally poses no threat to advisory client portfolios.

ETF News

Although it’s only the middle of August, it has already been a record year for ETF inflows:

Stock prices may have hit a road bump this week, but the same can’t be said about ETF inflows. Investors added $4.2 billion to U.S.-listed exchange-traded funds during the period, pushing year-to-date inflows to a record $289.4 billion, above 2016’s previous annual record of $287.5 billion.

Interesting Reads

Outdoor clothing company Exofficio has a blog of sorts on it’s website and published a post about what to see in Moab, UT. The scenery in this part of the country is stunning, there are two National Parks across the street from each other just northwest of the downtown on Highway 191:

There’s magic in the name Moab. The word conjures up dreams of sandstone landscapes dissected by canyons and lorded over by buttes and mesas. The town of Moab, Utah, nestled beside the Colorado River, casts a special spell on every visitor, enchanting them with the surrounding bare-bones landscape and a sense of limitless space. Spectacular scenery fills the Moab area, offering long views, a rainbow of colors, dazzling sunsets, and plenty to see and do. Driving Moab’s byways and backroads are the best way to explore its wild country and see its sights. These roads allow mountain bikers, rock climbers, hikers, and river rafters to get intimate with Moab’s red rock playground. Here are five of the area’s most scenic drives.

Sports

Any baseball fan will tell you that the history of baseball is the history of America. The history of both is complicated, with plenty of good and bad to along with many noteworthy figures. One such figure was Satchel Paige who pitched to great acclaim in the Negro Leagues primarily with the Kansas City Monarchs. He also had a brief stint in the Major Leagues but we was old by baseball standards by the time the color barrier was broken. He had almost enough service time though to qualify for the MLB pension, almost. He was 158 days short. The Undefeated shares the story of how the Atlanta Braves stepped up in 1968:

Said Bartholomay to The Washington Post (at the time): “We hope we can use him as a pitcher, but very frankly, we want to make him eligible for a place in baseball’s pension.” Paige was added to the active roster and would also help instruct the Braves’ pitchers on technique and conditioning.

Source: Google Finance, Yahoo Finance, Wall Street Journal, SeekingAlpha, Bloomberg, Ycharts.com, Reuters, Barrons, ETF.com, XTF.com, Bespoke Investment Group, CME Group, ESPN

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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