AdvisorShares Weekly Market Review – Week Ending 12/1/2017
Highlights of the Prior Week
Take the under on this time being different
November closed out as the eighth month in a row of gains for the S&P 500. Eddy Elfenbein tells us that November was the strongest of the eight and that December has historically been one of the strongest months of the year. For the month the Dow Jones Industrial Average gained 3.77%, the S&P 500 was up 2.77%, the NASDAQ added 2.14% and the Russell 2000 chipped in with 2.79%.
A lot has been made this year of the huge performance dispersion between growth and value. In 2016 of course, value outperformed noticeably but this year growth has absolutely trounced value, outperforming by 1200-1300 basis points depending on the proxies you look at. Interestingly though, last month value put on almost 1% on growth but this all happened in the last couple of days as tech got hit especially hard on Wednesday with some attributing the cause to the ebb and flow of the process for working the GOP tax plan through both houses of congress.
The 2-10 treasury spread continued to flatten last week, tightening up a basis point or two to 59 basis points with most of the move coming from a three basis point lift in the two year’s yield. We are big believers in the problems that accompany an inverted yield curve, it impedes access to capital. And while we pay close attention to the curve we would again remind that flattening is not inverting. The curve won’t be inverted until it is inverted. Flattening could mean less profitability for financials but doesn’t have to mean the end of the bull cycle as we believe an inversion would mark the end. If the curve starts to move closer to being inverted, just like in 2007 there will be plenty of pundits to tells us why this time will be different. That started in very vague fashion in the Up & Down Wall Street column as Randy Forsyth skeptically noted “typically, that is a negative portent for the economy and stocks, but the prevailing opinion is that it’s different this time because of various special factors.” We would take the under on this time being different.
The Chicago Mercantile Exchange will start trading bitcoin futures on December 18th. Aside from making a two way market more accessible, many believe it will pave the way for exchange traded funds to start trading, the idea being that ETFs would create the exposure with derivatives. The hope in some circles is that being able to short bitcoin might dampen volatility, this past week it moved 10% on three different days, two up and one down. During the financial crisis there were some stocks that were banned from short selling which arguably had the opposite effect of what was intended, those stocks kept going down. No one should be surprised if the adoption of a futures market does not result in reduced bitcoin volatility. More and more clients will likely start asking about bitcoin for their portfolios. We continue to suggest advisors spend the time to learn about cryptocurrencies in order to be able to have informed conversations regardless of the conclusions they draw about suitability.
Vanguard created a buzz announcing that it will launch six factor funds, five single factor and one multifactor that looks like will target momentum, quality and value. Barron’s coverage went to great lengths to stress that Vanguard views these as being actively managed funds, not smart beta, throwing in “‘Nobody at Vanguard believes in magic,’ John Ameriks, head of the nearly $35 billion quantitative equity group at Vanguard, told Barron’s.”
Contrarian thinking can make for a good investment strategy, it might also make for a good vacation strategy like going to Yellowstone National Park in the winter.
“It’s a completely different place in the winter than in the summer, but equally amazing and beautiful,” says Yellowstone spokesperson Sandy Fennell-Dobert. Just like other parts of the world, the winter weather in Yellowstone can take unexpected turns. But temperatures typically range from zero to 20°F during the day and often drop to sub-zero at night. It doesn’t take a math wizard to factor in the wind chill and know that nighttime in the park can indeed be brutal. Record lows of minus 66°F have occurred.
…used to keep a running count on the waiting list for Redskins season tickets. When I first moved to Washington it was something like 35 years. Then it was 20 years. Then 15 years. Then 10 years. Today the wait list for Redskins season tickets is 17 seconds. Not a typo. (And the team is even offering $100 gift cards to people who buy a season ticket package.)
Source: Google Finance, Yahoo Finance, Wall Street Journal, SeekingAlpha, Bloomberg, Ycharts.com, Reuters, Barrons, ETF.com, XTF.com, Bespoke Investment Group, CME Group, goldarticles.info, Weekly Standard