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Posted by on Jan 29, 2018 in ETF Strategist, Featured, Market Insight

AdvisorShares Weekly Market Review – Week Ending 1/26/2018

AdvisorShares Weekly Market Review – Week Ending 1/26/2018

Highlights of the Prior Week

Four Weeks Of Gains To Start 2018? Don’t Mind If We Do  

Macro

There is no shortage of superlatives for how domestic equities have started 2018. The year to date numbers for the indexes are in the 7’s and 8’s percentage-wise. For the week the Dow Jones Industrial Average gained 2.06%, the S&P 500 was up 2.20%, the NASDAQ rallied 2.25% and the Russell 2000 lagged with 63 basis points.There is plenty of opinion and data to support the idea that equities have entered some sort of euphoric blow-off stage and we have no pushback to that notion but people have been predicting imminent doom for months, even years but equities have continued higher at an accelerating rate. We have maintained that nothing thus far indicated the start of a rolling over in the broad markets. This will happen at some point and we will make note of it when it happens but it’s not happening now. It is also worth remembering that the historical nature of fast declines is that they snap back quickly, it is the slow, multi-month shallow declines that have gone on to become more problematic.

Furthering the discussion on equities, @tihobrkan tweeted a table from BofAML and EPFR Global showing $33 billion flowing into US equities last week, not fund flows but equities more broadly and this, he notes is close to a record. @awealthofcs tweeted that so far in 2018 the S&P 500 has made 13 new highs which equals the number of new highs made in the entire decade of the 2000’s. It is crucial for advisors to have a detached view on the comfort with which clients might have toward equities and educate them as to how unusual this type of environment is. The good times may or may not last for a long time still but this needs to be recognized for the unusual period that it is.

The first look at Q4 GDP printed on Friday at 2.6%, which was below expectations, many hoped it would print with a three handle. If there was a positive, buried in there was a 4.6% print for private domestic final purchases which actually is a double from the previous report. The weak headline number didn’t prevent yields from going up. For the week, the yield on the Ten Year US Treasury Note moved up three basis points to 2.66% while the Two Year closed at 2.11%, up about 6 basis point and narrowing the spread between the two to 55 basis points. The Ten Year continued higher on Monday, going above 2.70%. For a little context, although the ten year has broken out to the upside, it was at 2.60% last March. The two year’s yield is up 85 basis points since September 8th.

It’s been a wild year for the US dollar and even wilder week. Treasury Secretary Steven Mnuchin appeared to talk the dollar down, then a few others in the administration, most notably Wilbur Ross said Mnuchin wasn’t talking down the dollar then President Trump talked up the dollar, Mnuchin took it back and finally Trump talked it up again.In the middle of all that the dollar, as quoted by DXY, traded below 88.5 before closing the week at 88.89. About a year ago we cited obvious resistance in the DXY at 103 and have since noted that there is no correspondingly obvious support close to where it is now. With such a swift decline, some have called the dollar oversold and it could be and it could turn around at any time for any reason (or no reason) but the DXY’s 200 day moving average is only 6.2% away at 94.47. Maybe the dollar is oversold but not grossly oversold.  

ETF News

The New Year is off to a great start with $6.1 billion of positive fund flows through Thursday which is a record for one month and there was still four days to go. Much of the flow has gone into a couple of S&P 500 funds, which is interesting because January is historically a bad month for S&P 500 fund flows.

The flows into blockchain ETFs has also been massive. Two funds listed a week ago Wednesday with the larger of the two having $170 million already and the smaller fund already at $93 million. That success prompted First Trust to throw its hat into the ring with the First Trust INDXX Innovative Transaction & Process ETF (LEGR), which like the other two is fairly broad based with several mega cap tech stocks and plenty of financial sector exposure.

Interesting Reads

Offered without comment; Nutella riots in France.

Intermarché supermarkets offered a 70% discount on Nutella, bringing the price down from €4.50 (£3.90) to €1.40. But police were called when people began fighting and pushing one another. “They are like animals. A woman had her hair pulled, an elderly lady took a box on her head, another had a bloody hand,” one customer told French media.

Sports

San Diego is often praised as America’s finest city but after the loss of the Chargers it has also been derided as America’s worst sports city. Did you know the Padres almost left back in the 1970’s?

The San Diego Padres nearly left the SoCal surf and sunshine in 1974. They were bound for Washington, D.C., the nation’s capital. San Diego businessman C. Arnholt Smith sold the team for $12 million to a D.C. ownership group, headed by Joseph Danzansky. National League owners approved the transfer on Dec. 6, 1973. President Richard Nixon, among others, looked forward to buying some peanuts and Cracker Jack. “You can be sure all of us in the Washington metropolitan area would enthusiastically welcome a National League team,” Nixon wrote in a letter to league president Chub Feeney, according to a recent article in the Washington Post.

Source: Google Finance, Yahoo Finance, Wall Street Journal, SeekingAlpha, Bloomberg, Ycharts.com, Reuters, Barrons, ETF.com, XTF.com, Zerohedge, Bespoke Investment Group, CME Group, BBC, Dazzy Vance Chronicles

The AlphaBaskets blog provides frequent market insight and commentary by AdvisorShares Investments, LLC, created by AdvisorShares and other leading active managers.  AdvisorShares Investments is an SEC-registered investment adviser and the investment adviser to the AdvisorShares actively managed ETFs. The views expressed on AlphaBaskets should not be taken as investment advice or a recommendation for any of the actively managed ETFs advised by AdvisorShares.

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