AdvisorShares Weekly Market Review – Week Ending 11/21/2014
Happy Thanksgiving From AdvisorShares!
Highlights of the Prior Week
Equity markets had a sneaky strong week with the Dow Jones Industrial Average and the S&P 500 each gaining about 1% to close at all-time highs. While there is nothing new about the broad markets making new highs, the high made by the S&P 500 this week is very noteworthy because it marks an inflation adjusted all-time high, breaking the level set at the peak of the Internet Bubble in 2000 as reported by blogger Lance Roberts from STA Wealth Management. Roberts goes on to cite data that long stretches between inflation adjusted highs is not unprecedented and that making this new high is not necessarily a bullish indicator.
The NASDAQ and the Russell 2000 had weaker showings, rising 52 basis points and falling 16 basis points respectively.
The minutes for the October Fed meeting where the FOMC officially voted to cease its asset purchase program were as clear as mud, not because of intentional opacity like from Alan Greenspan but due to disagreement over things like how to convey how much and when to hike interest rates as well as which inputs they should be most concerned with in the immediate term.
The euro and the British pound each fell against the US dollar and the dollar rallied against the yen. Crude oil had a bumpy ride to a modest 1.70% gain and gold had a similar ride to a 1.24% gain. This week’s Up & Down Wall Street Column was devoted solely to the “barbarous relic,” a phrase attributed to John Maynard Keynes but may have actually come from a NY Times writer named John Austin Stevens in 1873 and included the following;
Galling as it might be to admit, Putin may be on the right side of the market, with gold now challenging the $1,200 level. Reuters reports that International Monetary Fund data show that Russia’s central bank expanded its cache of the metal for the seventh straight month in October, adding another 18.9 metric tons for a total of 1,168 tons, the fifth-largest stash of any central bank. Russia has stepped up its buying of gold following sanctions from the U.S. and the European Union in response to events in Ukraine.
Putin has been vocal in wanting to move away from currencies under Western—especially U.S.—control, which has spurred Russia to overtake China as the fifth-largest holder of gold. Various reports say demand for physical gold in China and India has remained strong, even as prices have slumped in global markets, which are dominated by so-called paper gold in the form of futures contracts and exchange-traded funds.
Also related to gold, this coming Sunday Switzerland will vote on a referendum on whether to keep 20% of the country’s reserves in gold. The Swiss National Bank, the Swiss central bank, is warning that this requirement, if passed, would hinder its ability to conduct monetary policy.
Bonds traded flat with the US Ten Year Treasury Note closing with a yield of 2.31%, down one basis point on the week. The yield on the German bund fell one basis point to 0.77%, in France the OAT shed three basis points to 1.11%, Spain now yields 2.01% and Italian debt once again yields less than the US at 2.21%.
Foreign equity markets had large moves in both directions. The Dax in Germany was up 5.18% and the CAC 40 added 3.51% while the Hang Seng fell 2.70% and the Australian market dropped a similar 2.75%.
ETF News & Data
Usually, inflows and outflows are dominated by the largest equity or fixed income funds and may give some insight into what investors are doing generally speaking. Last week however there was something unusual in the data worth mentioning. The leader in inflows was a 3X inverse natural gas ETN which brought in $2.8 billion to what was previously a $99 million fund. At essentially the same time, there was a $1.3 billion outflow from a 3X long natural gas ETN. This is the only time this year that these ETNs made the top ten in fund flows.
Overall $7.9 billion flowed into equity funds while $1.4 billion left fixed income.
There was only one new fund listed last week, it targets Chinese bonds and it was the second week in row for a new Chinese bond fund.
This week’s interesting read is sports related. SBNation looks at the struggle that would be assistant college basketball coaches go through to get their shot to be a head coach. There is a lot time spent attempting to relate to high school players in order win the recruiting wars, they move from program to program very frequently which means uprooting their families and they must work diligently in their own self-interest to build up and maintain their network of contacts because their big chance could come from anywhere or anyone. It’s a long but worthwhile read.
Most sports followers know how common it is for athletes to squander their earned fortunes. This is usually attributed to poor decisions or their working with “financial advisors” who steal from them. ESPN did a 30 for 30 documentary on the subject titled Broke that featured many well known athletes including Bernie Kosar and Antoine Walker.
Rarely, if ever, has there been one of these hard luck stories where a fortune was stolen by the player’s parents which is alleged to be case with Columbus Blue Jackets defenseman and US Olympian Jack Johnson.
On a lighter note another November college basketball tradition kicks off on Monday; the Maui Invitational starts at 2:30pm EST on ESPN2.
AdvisorShares ETF Strategist
Source: Google Finance, Yahoo Finance, Wall Street Journal, Bloomberg, Barrons, ETF.com, XTF.com, New York Times, Convergex, SBNation, ESPN, Marginal Revolution, Zerohedge
Weekly ETF Flows
For November 17, 2014 to November 21, 2014
S&P Sector Analysis
As for the sectors of the S&P 500, six outperformed the broad benchmark – Materials, Energy, Utilities, Healthcare, Industrials and Staples. The remaining four – Discretionary, Financials, Technology and Telecom – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 4.54% this week, with Materials outperforming all, and Telecom coming in last.
For November 17, 2014 to November 21, 2014
As measured by the S&P 500 sector indices, respective performances were: