Stocks Ride See-Saw Down
By Laif Meidell, CMT, President of American Wealth Management, and Portfolio Manager of the AdvisorShares Meidell Tactical Advantage ETF (NYSE Arca: MATH) and the AdvisorShares Market Adaptive Unconstrained Income ETF (NASDAQ: MAUI)
Equity markets surprised investors again Thursday as stocks continued the see-saw pattern, this time back down, that’s been going on this week.
Overnight news of a continued rally in the Japanese Yen put investors on edge as some investors speculated that the Bank of Japan was finally out of the financial ammunition it had been using to stimulate the Japanese economy. This belief is based on the performance of the Japanese Yen versus the U.S. Dollar, so far this year up 10.2 percent and making it the top performing currency. As we have seen in the U.S. over the past several years, stimulus measures typically have the effect of lowering interest rates along with the country’s currency value.
Stock losses eclipsed Wednesday’s gains with the Standard and Poor’s 500 down 1.2 percent and the Nasdaq Composite lower by 1.47 percent on the day. All economic sectors closed lower on Wednesday with financials the hardest hit as the Dow Jones U.S. Financial index fell 1.84 percent. Financial stocks typically outperform during periods of higher interest rates, so the recent underperformance in this area may be an indication investors don’t foresee interest rates going up any time soon.
The recent choppiness in the stock market clearly has some investors worried as evidence by the flight to quality in the bond market. However, thanks to the recent decline in the U.S. Dollar, this week’s top performing bonds were led by high quality bonds both in the U.S. and overseas.
The top performing bond index was the Barclay’s U.S. 20+ Year Treasury up 1.71 percent over the past five trading days, followed by the S&P/Citigroup International Treasury Bond index higher by 0.86 percent.