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Posted by on Oct 13, 2014 in Market Insight

AdvisorShares Weekly Market Review – Week Ending 10/10/2014

AdvisorShares Weekly Market Review – Week Ending 10/10/2014

Highlights of the Prior Week

Macro

Markets went from ugly to, well, uglier last week. On Wednesday the market received a palliative of support from the Fed which expressed concerns about threats to economic growth from both economic factors as well as geopolitical factors and although the S&P 500 managed to gain 1.57% on Wednesday it was still down 3.12% for the week. Much was made of volatility “returning” last as pundits took notice that the Dow 30 had 200 point swings three days in a row on its way to a 2.73% decline for the week and is now down 0.20% for the year. The NASDAQ was down 4.44% for the week.

The Semiconductor industry got taken to the woodshed Friday when Microchip Technology gave poor guidance due to what they believe is a weakening economy. This brought down the entire industry in a surprisingly aggressive fashion. The benchmark Philadelphia Semiconductor Index, more commonly known by its SOX ticker was down 6.89%.

The ongoing trend of small cap relative underperformance continued as the Russell 2000 fell 4.61% on the week and is down just shy of 10% in 2014. European equities got smacked around as well. The German Dax fell 4.42% and is now down 8% for the year. The CAC 40 in France (more on France in moment) fell 4.79% on the week and for the year is down just over 5%. The FTSE 100 was not much better, falling 2.74% last week and is also down on the year; 6%.

Interestingly emerging markets fared slightly better, perhaps helped out by Shanghai which was up 1.14% for the week. Hong Kong was also up slightly adding 10 basis points. Two weeks ago Japan stood out as one of the only markets to go up but it too succumbed to the selling with a drop of 2.6%.

Bonds reacted swiftly to the equity markets. The yield on the Ten Year US Treasury Note fell 14 basis points on the week to 2.30% although the US is still a high yielding market. Ten years in Germany will get you 89 basis points, France will get you 1.25%, Spain 2.07% but the US finally yields less than Italy’s 2.32%.

West Texas Crude was down 4.65% which hurt oil stocks. The NYSE ARCA Oil & Gas Index (XOI) was down 4.89%. Gold was a bright spot with a 2.95% lift. While gold can add value as a diversifier things are probably not going well when the yellow metal is a top performer.

With all that went on, why not throw in a couple of sovereign debt downgrades? S&P cut France to AA and Finland, which uses the euro as its currency was downgraded to AA+ by S&P. The US of course long ago lost its AAA rating but at AA+ it is higher than that of France yet the US yields 105 basis points more. The recent trend of dollar strength reversed last week with the greenback weak against the yen, euro and British pound perhaps caused by Fed comments as well as the drop in yields.

A couple of weeks ago we offered up the possibility that equities could be warning of a turn in direction after many years of rallying. While that message could still be true, the S&P 500 is down 5.23% in just 16 trading days which is a fast decline (for now?). History has been far crueler to slow declines.

ETF News & Data

Of the six new funds launched last week, the most interesting were the three actively managed bond funds from Fidelity which are actually different share classes of long standing traditional mutual funds.

Fidelity essentially was out of the ETF business offering only one fund. Last October it launched a suite of domestic equity sector funds which have quietly accumulated a combined $1 billion in AUM. The new bond funds are coming out of the gate with a combined $130 million.

The PIMCO Total Return Fund made the top ten list for fund outflows but only $218 million left the fund after losing $662 million last week. Eight of the top ten leaders in fund creations were bonds funds which isn’t shocking after two difficult weeks in a row for equities. One of two equity funds on the top creations list was a fund targeting consumer staples stocks which of course have historically been defensive in nature.

Interesting Reads

Research likely to anger anyone who was a slacker or procrastinator in their school days cites that homework isn’t as important as we were told. From the Washington Post;

…even at the high school level, the research supporting homework hasn’t been particularly persuasive.  There does seem to be a correlation between homework and standardized test scores, but it isn’t strong.

Wait, what?

Sports

Part sports but also part interesting read, Details Magazine offers a workout consisting of only five exercises. Actually the focus is five different movements; pushing like with bench press, pulling like with pull ups, hip hinges like with squats, deadlifts and planking. The article suggests two sets of each with 12 reps per set. Once your doctor gives you the ok for exercise we would suggest adding plenty of cardio.

Roger Nusbaum

AdvisorShares ETF Strategist

Source: Google Finance, Yahoo Finance, Wall Street Journal, Bloomberg, Barrons, ETF.com, XTF.com, Yahoo.com. US News and World Report., Washington Post, Reuters, Details

 

 Weekly ETF Flows

2014.10.13_pic 1

For October 6, 2014 to October 10, 2014

2014.10.13_picture_1a

S&P Sector Analysis

As for the sectors of the S&P 500, five outperformed the broad benchmark – Utilities, Staples, Telecom, Healthcare and Financials. The remaining five – Discretionary, Technology, Materials, Industrials and Energy – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 5.92% this week, with Utilities outperforming all, and Energy coming in last.

For october 6, 2014 to September 10, 2014

As measured by the S&P 500 sector indices, respective performances were:

2014.10.13_pic5

 

david@mediaworksllc.com

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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