AdvisorShares Weekly Market Review
Highlights of the Prior week
For the week of September 16 – September 20
The market rose for the third week in a row and once again the news about Federal Reserve was the most important factor for the market’s movements. On Monday, the market started off on a positive note after Larry Summers withdrew his name from the race to become the next Fed Chairman. Although Summers hasn’t made many public statements about monetary policy, many investors were concerned that he would be more hawkish in tightening monetary policy than Janet Yellen, the current Vice Chair of the Fed who is now considered the most likely candidate to get the top job. However, the best day for stocks last week was Wednesday, when the Dow Jones Industrial Average and the S&P 500 reached new highs. The much-anticipated Federal Open Market Committee meeting ended in the afternoon with the Fed pledging to continue purchasing $85 billion in new bonds and mortgage-backed securities. Fed chairman Ben Bernanke gave a press conference where he explained that the Fed had decided to delay tapering asset purchases due to a weak labor market, rising interest rates over the summer and the possibility of a government shut down or even the possibility of Congress failing to raise the debt ceiling. However, the market fell on Friday after a Fed official said that it was possible that tapering could begin after the Federal Reserve meeting next month. In August, industrial production increased by 0.4% and the CPI only rose 0.1% but the best news was about the housing market. Sales of existing homes rose to an annual rate of 5.49 million in August (the highest level since 2007), while housing starts increased to 891,000 for the same month.
US Treasuries rallied on news that the Fed was delaying its anticipated tapering of asset purchases. Shorter-term maturities did especially well last week. Municipal bonds had a good jump after lagging the bond market for several weeks. High yield debt performed particularly well as investors rushed to riskier assets in order to receive higher yields. Many companies with below investment grade ratings took advantage of the strong investor demand for high yield paper to issue new debt. After a rough summer, emerging market debt had a great week after investors became more interested in investing outside the low-yielding US bonds markets and many emerging market currencies gained versus the dollar on news of the Fed’s decision. Also, some emerging markets have been posting impressive growth numbers as of late. Columbia’s 4.2% increase in second-quarter GDP, exceeded most estimates, while Peru’s growth for the quarter came in below expectations but was still a respectable 4.5%.Sources: *Indexes are from Reuters and Yahoo! Finance 4pm closing data *Gold prices are from EcoWin and J.P. Morgan Asset Management *Treasury rates are from Bloomberg.com *Municipal and high yield rates are from Barclays Capital
Past performance is not indicative of future results.