AdvisorShares Weekly Market Review – Week Ending 1/22/2016
Highlights of the Prior Week
Selling Takes A Breather
Domestic equity markets actually went up last week. It has been so long since that happened that investors might have forgotten that they can go up. It was a volatile ride however with a healthy dose of downside action along the way. For the shortened week the Dow Jones Industrial Average added 67 basis points, the S&P 500 was up 1.41%, the NASDAQ gained 2.29% and the Russell 2000 moved ahead by 1.26%.
When the markets were falling on Tuesday there was plenty of gloom to be had in the media and then when things turned up there was plenty of talk about V-shaped bottoms. Whether coincidental or not equities went down when oil went down and then equities rallied, especially on Thursday and Friday, as oil rallied. For now, the two appear to be very closely linked and the swift decline in recent months (longer than that really) has led to oil being viewed as an immediate proxy for economic activity as relates to demand. Last week in this space we posited that the decline in oil might be overdone. The bounce last week does not mean a bottom in and more importantly should not set the expectation that volatility is over. From the low on Wednesday, the new front month March contract for WTI rallied 16.4% through the end of the week.
The ups and downs of the yield on the Ten Year US Treasury Note were consistent with the ups and downs in equities. The yield spent all of Wednesday and a good part of Thursday below 2% until oil and equities started to lift. For the week the note added one basis point to 2.04%.
Part of the move in domestic markets was attributed to comments from ECB President Mario Draghi who gave a “whatever it takes” pep talk which sent European yields lower and European equities higher. The German bund yield dropped to 0.48%, the French OAT rallied to 0.79%, although not part of the euro obviously the Swiss ten year moved further into negative territory at -0.17%, Spain now yields 1.73% and Italy was essentially flat at 1.57%.
In European equities the German Dax gained 2.3%, the CAC 40 jumped 3.21% and the FTSE 100 tacked on 1.65%. Asia was more mixed with Australia adding 0.42% and the Shanghai Composite squeezed out 54 basis points to the upside. The Hang Seng dropped 2.22% and although the Nikkei was down 1.06%, the bigger story was the almost 6% rally on Friday which came so fast that it might have simply been a form of capitulation on the part of sellers.
Where the VIX measures fear, clearly that has abated for now but 2% moves in equities, even to the upside, means volatility is still heightened and could stay around a little while longer.
ETF News & Data
Fund flows last week were interesting with massive flows into large cap funds, especially ETFs tracking the S&P 500, as well as an inverse S&P 500 fund and outflows from riskier equity segments including domestic small caps and emerging market equities.
XTF.com reports no new funds being launched last week.
Remember Rick Springfield from the early 1980’s? Rick Springfield as in Jesse’s Girl and a few other things since then? It turns out he has a world class Star Wars toy collection. Rolling Stone provides some detail and a video:
Considering that he’s been a rock icon for more than 30 years, it’s hard to imagine that there are too many sides to Rick Springfield that we haven’t seen yet. And yet, the “Jessie’s Girl” singer — who’s been moonlighting as an actor since the Seventies, and recently stepped up his onscreen game with roles in True Detective and Ricki and the Flash — is still full of surprises, even at 66. One didn’t-see-this one-coming shock in particular: Springfield owns one of the world’s biggest collections of Star Wars action figures.
Sad and perhaps surprising news that Former Olympic Downhill Champ Bill Johnson Dies At Age 55. Johnson won gold in Sarajevo in 1984. From ESPN:
Johnson tried to make a comeback ahead of the 2002 Salt Lake City Olympics at the age of 40 but crashed in a downhill training run in 2001 at the U.S. championships at The Big Mountain near Whitefish, Montana. He suffered a traumatic brain injury that erased nearly a decade of memories. He had to learn how to walk, talk and eat again.
Source: Google Finance, Yahoo Finance, Wall Street Journal, SeekingAlpha, Bloomberg, Reuters, Barrons, ETF.com, XTF.com, Bespoke Investment Group, Slate, SB ESPN
Weekly ETF Flows
For Janary 19th, 2016 to January 22nd, 2016
S&P Sector Analysis
As for the sectors of the S&P 500, five outperformed the broad benchmark – Telecom, Discretionary, Technology, Staples, and Energy. The remaining five – Healthcare, Utilities, Materials, Industrials, and Financials – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 4.90% this week, with Telecom outperforming all, and Financials coming in last.
For Janary 19th, 2016 to January 22nd, 2016
As measured by the S&P 500 sector indices, respective performances were: