AdvisorShares Weekly Market Review – Week Ending 1/20/2017
Highlights of the Prior Week
“This Indecision’s Bugging Me”
Markets seem to be bugged by indecision as summed up by The Clash in 1982 as the rally stalled out, treasury yields have drifted lower very quietly and the VIX is hovering below 12 as today marks the first full “work day” of the new administration. There are several unresolved issues for the new President including whether he is or is not in violation of the Emoluments Clause in Article 1 of the US Constitution, the fact that only about 10% of the administration appointments he needs to make have been filled and perhaps on a less serious note, whether he plans to alter his Tweeting habits. Tying this together, Barron’s quoted Steven Sosnick from Timber Hill as saying “Trump’s personality is incompatible with a 12 VIX.”
It was a very flat week ahead of the inauguration on Friday of President Donald Trump. The Dow Jones Industrial Average fell almost three basis points creeping ever so slightly away from 20,000. The other major indexes were also lower as the S&P 500 dropped 0.15%, the NASDAQ gave up 0.32% and the Russell 2000 lagged with a decline of 1.39%.
Most of the foreign equity markets were similarly subdued last week including the DAX which gained one basis point, the Hang Seng which fell 0.04% and the Nikkei, KOSPI and Shanghai Composite each had moves less than one percent. The FTSE 100 fell 1.9% as that market attempts to digest the ever-evolving Brexit story (one development last week was Goldman Sachs’ intention to relocate jobs out of the City). The CAC 40 fell 1.49% perhaps due to the recent surge in the presidential polls of Marine Le Pen, the far right candidate.
As mentioned the yield on the Ten-Year US Treasury Note continued to drift lower at the start of last week down to 2.32% but then worked higher to close at 2.46%, perhaps getting a boost from a year over year print of 2.1% for the CPI as well as a drop in jobless claims down to 234,000.
The German bund yield inched up three basis points to 0.36%. Over the weekend in the Barron’s Roundtable Jeff Gundlach talked about shorting the bund because of the record gap between the yield of the bund and the German inflation rate. He says the spread is unsustainable. The yield for the French OAT moved up 10 basis points, again perhaps in line with Le Pen’s move in the polls. The UK gilt yield moved up seven basis points to 1.43%, the JGB closed last week with a positive 0.06% yield and the Swiss ten year remains barely negative at -0.04%.
Gold was able to maintain its uptrend that started in mid-December, gaining 0.17% to close at $1210. We would add that it rallied 0.72% on inauguration day. West Texas Intermediate Crude continued its now month-long churn in the low $50’s closing just above $53 and generally flat for the week.
Currencies have been interesting of late. The dollar went up against the yen rather dramatically after the election getting as high as 118 in mid-December and has been rolling over very slowly ever since, closing at 114 on Friday. The euro went on a month-long slide after the election down to 1.04 but has been trending higher and is now at 1.07. The British pound actually rallied after the election up to 1.27, slid to 1.20 in mid January and now resides at 1.23. The fundamental argument against the three major currencies (lousy demographics, weak economic underpinnings) is simple and makes a lot of sense but the dollar index, commonly tracked as DXY has historically met resistance at 103 which is where it stalled out at its recent mid-December high.
While once the lifeblood and center of life for many small towns, Volunteer Firehouses Struggle To Find Recruits;
This all-volunteer fire station and the two others in Shippensburg, a factory and university town of about 5,500 people in a central Pennsylvania valley, are vestiges of the past. Firefighters sit around on weekdays playing rummy, and people gather for bingo Friday nights. Yet, the stations are much quieter than they were decades ago, when they felt like the center of the town. And as the community’s interests have shifted from the fire stations, the number of volunteers has fallen.
With the NFL season winding down to the Super Bowl in two weeks it turns out that Love Of Game Drives Great Britain American Football Hopefuls;
The coaches received 150 applicants for the tryout with the majority coming from the UK’s top division — the amateur British American Football Association National Leagues (BAFANL).
Source: Google Finance, Yahoo Finance, Wall Street Journal, SeekingAlpha, Bloomberg, Ycharts.com, Reuters, Barrons, ETF.com, XTF.com, Bespoke Investment Group, ESPN, pewtrusts.org
As for the sectors of the S&P 500, nine outperformed the broad benchmark – Staples, Telecom, Real Estate, Materials, Utilities, Technology, Industrials, Energy, and Discretionary. The remaining two – Healthcare and Financials – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 3.72% for the week ending 1/20/17, with Staples outperforming all, and Financials coming in last.
For January 17th, 2016 to January 20th, 2016
As measured by the S&P 500 sector indices, respective performances were: