AdvisorShares Weekly Market Review – Week Ending 1/24/2014
Highlights of the Prior Week
The biggest macro news of the last week may have actually been the personnel shake up at fund giant PIMCO when CEO Co-CIO Mohamed El-Erian announced his resignation from the firm.
El-Erian is of course well regarded as an economist, investment manager and investment strategist by virtue of stints at the IMF, Harvard Management Company and of course two tours of duty at PIMCO.
PIMCO’s Bill Gross was quoted in the WSJ as saying that while he did not want El-Erian to go but he does see this as an opportunity to take the firm into new areas for growth.
There won’t be too many instances where a resignation is such big news but regardless of what the real reason for his departure it should not be a surprise if this news turns out to be looked back on as a watershed moment for bond market investing.
The Argentina story continued to evolve last week although deteriorate may be a better word. As was widely reported, the central bank appears to have stopped intervention in the currency markets to support the currency; the peso. As a result, the peso dropped 11% last Thursday which is an epic move for a currency.
As part of its coverage of the story the Wall Street Journal posted five charts to show the chain reaction that ensued in other emerging market currencies. Notably there were large declines in the Turkish lira, South African rand and interestingly the US dollar had a huge decline against the Japanese yen.
Argentina is a serial offender on this front. Amusingly, the BBC reported that the 11% drop was the biggest one day drop since 2002; point being currency panics have been part of the equation with Argentina.
Global equity markets fell on the news likely because of the history of past emerging market currency crises like the Mexican peso in 1994, the Thai baht in 1997 and the Russian ruble in 1998. The way these have worked in the past is that these types of events lead to fast declines in equities and the nature of fast equity declines is that they have tended bounced back quickly. There is no way to know the outcome of this event until it is over but sharing the historical context with clients and reminding them that this has happened before should be helpful.
ETF News & Data
If it seems like there have been a lot of new ETFs this year, that’s because there have been. XTF reports that so far in 2014 there have been 21 new funds from nine different providers. The emphasis has been on active management, smart beta and products that seek to offer yield from sources other than plain vanilla bonds.
According to a report from PowerShares, commodity ETFs saw a massive outflow in 2013 dropping by $54 billion down to $58 billion.
Farnam Street Blog posted What The Most Successful People Do Before Breakfast. Charlie Munger, Warren Buffett’s long time colleague, sets “aside an hour in the mornings every day just to learn.”
Three additional habits mentioned in the article were nurturing careers, family time and exercise.
The most interesting sporting events from what is usually an off week (the week between the conference finals and the Super Bowl) were the NHL games from Dodger Stadium and Yankee Stadium. The Anaheim Ducks beat the LA Kings in LA and the Rangers beat the New Jersey Devils.
Stadium hockey is always a spectacle but while many in the sports media were concerned that the Los Angeles game would be marred by hot weather it was actually the game at Yankee Stadium that had problems; the game was delayed by over an hour because of “sun glare.”
The show in LA was also far superior with Kiss, pyrotechnics, Vin Scully and the USC marching band while New York had Southside Johnny & The Asbury Jukes. Two fun games and one great side show.Roger Nusbaum AdvisorShares ETF Strategist
Weekly ETF Flows
For January 17, 2014 to January 24, 2014
S&P Sector Analysis
As for the sectors of the S&P 500, seven outperformed the broad benchmark – Utilities, Technology, Staples, Telecom, Energy, Healthcare, and Discretionary. The remaining three – Financials, Industrials, and Materials – each underperformed. The dispersion between the top-performing and bottom-performing sectors rose to 4.33% this week, with Utilities outperforming all, and Materials coming in last.
For January 20, 2014 to January 24, 2014
Sector performances, as measured by the S&P 500 sector indices were: