AdvisorShares Weekly Market Review – Week Ending 8/28/2015
A White Knuckle Ride To A Small Gain
Last week proved out to be quite the rollercoaster ride opening with a panic on Monday much of which was recovered by the close of the session. Tuesday started out with much promise only to give way to more selling but markets staged a strong rally from mid-day Wednesday through Thursday and were flat on Friday.
Despite the manic action the Dow Jones Industrial Average gained 1.09%, the S&P 500 added 89 basis points, the NASDAQ finished with a strong 2.58% boost and the Russell 2000 was better by 54 basis points. The action at the start of the week is a movie that we have all seen before. Huge moves like that are fueled by emotions and emotions were on full display in all of that mess. In the heat of last week’s decline we posted our weekly update and averred for cooler heads not because we knew what would happen, just that, again we had seen this movie before.
The CBOE Volatility Index, commonly known as VIX spiked briefly above 50 on Monday but closed the week at 26. We would also note one recent development for the S&P 500 chart according to StockCharts.com which is that with the decline of the last couple of weeks the slope of that index’ 200 day moving average has gone negative which happens less frequently than simple breaches of that indicator.
Getting much of the blame for the volatility is China, especially if you read the current issue of Barron’s. Like any market, there is both a bull case and a bear case but clearly Chinese officials feel compelled to try to prop up their market with things like bans on insider selling, having a heavy hand in the currency markets and the promise of institutional purchases of equities yet to come.
The equity volatility brought the Fed into play (kept it play?) as William Dudley from the New York Fed noted the case for a September hike was less compelling but Fed Vice Chair Stanley Fischer said it too soon to tell. The GDP report was revised to 3.7% well ahead of the 3.2% estimate. If the Fed does hike in September then the 3.7% number will likely be cited as part of the justification.
As mentioned, China is getting much of the blame for the current market event and that was reflected in the Shanghai Composite which was down 7.82% for the week despite a 4.82% gain on Friday. The Hang Seng and Nikkei were both down; 3.57% and 1.56% respectively while the Australian ASX 200 managed to add 75 basis points. European equities had a similar week to US equities with large declines early in the week but ultimately having volatile rides to slight gains. The FTSE 100 rallied 0.97%, the CAC 40 advanced by 65 basis points and the DAX gained 1.72%.
Global bond yields moved higher last week. The Ten Year US Treasury Note moved up to 2.18% from from 2.04% last week but not before touching 1.90% early on Monday in the heat of the equity panic. The German bund yield moved up to 0.74%, the French OAT now yields 1.09%, the Swiss Ten Year is still firmly negative at -0.12%, Spain closed out at 2.06% and ten years in Italy will get 1.91%.
Crude oil bounced 14.5% on the week to take back the $45 level but when measured from the low, early on Tuesday the gain was 19.6%. Gold priced in dollars fell slightly more than 2%.
ETF News & Data
Three new funds launched last week including two more Shark Tank dividend focused equity funds and a municipal bond index fund from Vanguard.
Inflows were seen in broad based domestic equities, plain vanilla bond ETFs as well as two different funds tracking the VIX index likely in response to the increased volatility in markets. There were more than two billion of outflows from emerging market ETFs as well as several sector funds including funds tracking financials, healthcare and consumer discretionary.
Here’s something you didn’t know; back in the 1960’s there were Ford Mustang station wagons (actually just called Ford Mustang Wagons). As best as we can tell from Car & Driver’s coverage in 1966, these were not production models but custom jobs instead.
Clark and Cumberford would like to build Mustang wagons as a commercial venture. The public response to their car has been spectacular, and they believe that they could build it reasonably enough to sell in this country at an attractive price. Although Ford has shown no official interest in the project, there are pretty good indications that GM is exploring the concept for both their Chevrolet/Pontiac Mustang-challenger and their more expensive Toronado/Riviera-class cars.
If you were expecting the Tom Brady saga to end today you might be disappointed to learn that it could play out like the Greek debt debacle. From USA Today:
Barring a last-minute settlement or delay by the court, Judge Richard M. Berman will either confirm or vacate the four-game suspension NFL Commissioner Roger Goodell upheld following Brady’s arbitration. That decision could come even as early as Monday, when all parties will be present in the U.S. District Court for the Southern District of New York. Berman has said he will try to rule by Sept. 4, a date agreed upon by the union and the league that would allow the Patriots to adjust for Brady’s availability for the Sept. 10 season opener.
For August 24th, 2015 to August 28th, 2015
S&P Sector Analysis
As for the sectors of the S&P 500, three outperformed the broad benchmark – Energy, Technology, and Discretionary. The remaining seven – Materials, Industrials, Healthcare, Telecom, Staples, Financials, and Utilities – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 7.87% this week, with Energy outperforming all, and Utilities coming in last.
For August 24th, 2015 to August 28th, 2015
As measured by the S&P 500 sector indices, respective performances were: