AdvisorShares Weekly Market Review – Week Ending 8/26/2016
Highlights of the Prior Week
Who Is Stan Fischer & Why Does He Hate The Stock Market?
If the Olympics caused the markets to (almost) shut down for the previous couple of weeks it was threat of the Yellen speech at the Jackson Lake Lodge on Friday that derailed activity now. Friday started with a downgrade to Q2 GDP by 0.1% to 1.1%. Then Yellen was kinda, sorta, almost hawkish in using the word “strengthening” to describe the economy and prospects for a hike. Domestic markets moved slightly higher on this, and we do mean slightly. Then CNBC interviewed Stan Fischer who allowed for the possibility for two hikes this year. We would note he was of course vague and has tried to provide the hawkish side of the argument in recent months.
There was also odd news from the multi-year Bill Ackman/Carl Icahn feud. News hit early Friday that Icahn’s broker was looking for a buyer for some of his shares and Ackman despite being short was interested in buying some of Icahn’s stake as getting Carl out would ultimately be good for his short position, or so he said in an interview on CNBC. All of this drove the stock down 4%, then after the bell more news broke; Icahn actually increased his position. There will likely be more to the story but it struck us as immediately odd that Icahn’s broker would shop the position on the front page of the newspaper.
Much was made last week over the lack of volatility in recent equity trading, there hasn’t been a single day move greater than 1% in either direction since July. This certainly is not unprecedented but can serve as an opportunity for advisors to remind clients that volatility will come back at some point regardless of what direction it might take prices.
For the week, the Dow Jones Industrial Average fell 0.83%, the S&P 500 gave up 0.66%, the NASDAQ dipped 0.36% but the Russell 2000 was up 0.10%. Most foreign markets were similarly flat last week. The DAX gained 0.41%, the FTSE 100 fell 0.30%, the CAC 40 moved ahead 0.94%, the Shanghai Composite declined 1.22%, the Hang Seng was off 12 basis points, the Nikkei was down 1.12% and the ASX 200 shaved off 20 basis points.
The Ten Year US Treasury Note took Yellen’s speech in stride with just a modest reaction but not so with Fischer’s post-speech comments. The yield backed up ten basis points to 1.63%, its highest yield since the day of the Brexit vote. The German bund fell further into negative territory at -0.07%, the French OAT yield dipped slightly to 0.16%, the UK gilt continues to work lower at 0.56%, the Swiss ten year is down to -0.52% and the JGB charges seven basis points.
There were two new funds listed last week; a pair of actively managed equity ETFs from First Trust that seek to manage volatility.
AccuShares is throwing in the towel on its four ETFs, two of which track crude oil and the other two tracking VIX. These are paired funds that offset each other. This was first tried with real estate back in the 2000’s, and also had a short lifespan.
As a reminder, this week, some indexes will be carving REITs out of the financial sector to create an 11th sector. Check any broad based, index funds you might use to see what if any changes are made.
Do you remember HoJo’s? Well GrubStreet tells us There Will Soon Be Just One Howard Johnson’s Left–Here’s How The Once Mighty Restaurant Chain Collapsed:
Soon, there will be only one Howard Johnson’s left. In September, the Bangor, Maine, location of Howard Johnson’s, the once-ubiquitous roadside chain and orange-roofed icon of American progress, will close after half a century of serving clam strips and root-beer floats. When it does, the only remaining HoJo’s will be in Lake George, New York.
If you saw the many commercials last football season for daily fantasy leagues from Fanduel and Draftkings you probably were either very excited or you didn’t get it at all but they are both very popular. ESPN tried to make the case that these would be extinct in short order but Fortune says Sorry ESPN, But Draftkings & Fanduel Didn’t Implode:
Ride-hailing is actually a good parallel here, because it and daily fantasy share the challenges of being targeted by regulators at the state and local levels. Again, is Uber “imploding” because it faces lawsuits and unsympathetic elected officials? Of course not. In fact, a counterargument could be made that as lawmakers codify permissive rules for such industries―as has happened for daily fantasy in New York― it creates the type of certainty that businesses and their investors typically crave.
Source: Google Finance, Yahoo Finance, Wall Street Journal, SeekingAlpha, Bloomberg, Reuters, Barrons, ETF.com, XTF.com, Bespoke Investment Group, GrubStreet, Fortune
For August 22nd, 2016 to August 26th, 2016
As for the sectors of the S&P 500, three outperformed the broad benchmark – Financials, Technology, and Materials. Industrials were flat, and the remaining six – Discretionary, Telecom, Staples, Energy, Healthcare, and Utilities – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 2.58% for the week ending 8/26/16, with Financials outperforming all, and Utilities coming in last.
For August 22nd, 2016 to August 26th, 2016
As measured by the S&P 500 sector indices, respective performances were: