AdvisorShares Weekly Market Review – Week Ending 12/12/2014
Highlights of the Prior Week
Equity markets got pummeled last week with large declines despite the positive perception afforded to falling energy prices. The Dow Jones Industrial Average fell 3.70%, the S&P 500 gave up 3.46%, the NASDAQ fared better with a 2.66% drop and the Russell 2000 weighed in with a decline of 2.49%. If you think that was bad, our friends at The Big Picture Blog pointed out that the Athens Index Composite fell 20% on the week due to political instability that sent sovereign bonds yields over 9% (more on global yields below).
West Texas Intermediate Crude fell 4% on Friday alone and over 11% for the week making this the second week in the last three that this market has crashed. Crude has fallen almost 50% since June. Gold, hated metal that it is, is down roughly 35% in three and half years. While no one knows where the bottom in oil is, this drop does meet any reasonable definition of a fast decline. The oil market of course also wreaked havoc on Russia where equities have fallen 9% in the last two weeks and selling in the ruble has accelerated. Year to date the USDRUB is up 54% (the represents the extent to which the dollar has rallied against the ruble). Interestingly the Russian stock market is up slightly in 2014 but because of the currency Russian equity ETFs available to US investors are down more than 40%.
The other global markets we regularly follow in this report were all lower except for Shanghai which overcame a 5% decline on Tuesday to gain six basis points for the week. Elsewhere in Asia, the Hang Seng Index was down 3.15%, the Nikkei was down 3.06% and Australia was down 2.07%. Europe fared far worse with a 4.88% decline in Germany, 6.6% drop for the UK and 7.03% decline in France as Fitch cut its debt rating to AA. YTD the European major markets are up 45 basis points, down 6.69% and down 4.35% respectively.
Most global bond markets resumed the deflation trade last week. The yield on the US Ten Year Treasury Note fell 20 basis points to 2.10%. The German bund yield knifed lower to 0.62%, the French OAT now yields 0.90%, Spain’s ticked up slightly to 1.88% and Italy bounced up to 2.06%.
In currencies the Euro actually rallied against the dollar last week as did the British pound while the dollar fell 2% against the yen. Gold actually rallied 2.46% last week. Although gold continues to be hated for its poor performance in conjunction with rising equity prices over the last several years in continues to have a low to negative correlation to domestic equities certainly over the long term and last week for the short term.
The Federal Open Market Committee is due to meet this week and markets will be looking to divine any further clarification as to when the Fed might start to raise rates but if last week’s asset price volatility follows through into the new week then the FOMC may take a back seat.
Specialty retailer Petsmart agreed to an $83 buyout from BC Partners. The stock is up 39% since it first went into play in July accounting for most of the price appreciation and explains why the announced deal comes at such a slight premium to Friday’s closing price of $77.67.
ETF News & Data
With the relatively large drop in equities last week, it is not shocking to the SPDR S&P 500 lead the outflows at $1.9 billion after a couple of weeks of relatively large inflows. One unusual name on the outflow list was a single country fund tracking Hong Kong with $160 million, country funds rarely make the top ten lists coming or going. Interestingly the iShares Russell 2000 ETF lead inflows with $1.3 billion.
There were four new ETFs last week including a second-to-market low carbon index fund and an emerging market equity index fund that excluded state owned enterprises.
We continue to be suckers for a good dog story. This is the story of Pips, the un-adoptable dog who was given purpose and fulfillment in a University of Washington program called Conservation Canines. Pips has been put to work searching for scat out in the wild. If you didn’t know this was a thing, scientists can keeps tabs on where, how many and the health of wild animals in a non-invasive manner.
For a bonus read, we’ve talked about Tiny Houses many times here and will 87 square feet is a tough sell maybe a Small House can be a solution instead?
Yahoo caught up with Antoine Walker former Boston Celtics star and before that a star at the University of Kentucky. The focus is his life “after losing $110 million.” We just mentioned Walker recently here in referencing the 30 for 30 documentary titled Broke which looked at numerous athletes that have gone bust for one reason or another. He admitted in the Yahoo piece to living well beyond his means, covering the expense for his entire entourage to live the high life but he also got over extended in real estate and the impression was given that this was the biggest contributor to his financial downfall.
AdvisorShares ETF Strategist
Source: Google Finance, Yahoo Finance, Wall Street Journal, Bloomberg, Barrons, ETF.com, XTF.com, Yahoo Sports, Convergex, Small House Blog, Haida Gwaii Magazine
Weekly ETF Flows
For December 8, 2014 to December 12, 2014
S&P Sector Analysis
As for the sectors of the S&P 500, six outperformed the broad benchmark – Utilities, Staples, Discretionary, Financials, Healthcare and Technology. The remaining four – Industrials, Telecom, Materials and Energy – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 8.15% this week, with Utilities outperforming all, and Energy coming in last.
For December 8, 2014 to December 12, 2014
As measured by the S&P 500 sector indices, respective performances were: