AdvisorShares Weekly Market Review – Week Ending 1/30/2015
Highlights of the Prior Week
The first month of 2015 is now in the books and most market participants are probably glad to see it go. The magnitude of all the market drivers in December seemed to increase in January. Domestic stocks were down a little in December but fell more in January. Shockingly low yields in the government bond market went even lower and extreme volatility in commodities and currencies became even more extreme.
The Dow Jones industrial average was down 2.87% for the week and 3.69% for the month of January while the S&P 500 fell 2.77% last week and 3.10% in January. The NASDAQ fell a similar 2.56% for the week and has logged a 2.12% decline year to day and finally the Russell 2000 was down 1.98% last week and is down 3.25% in the New Year. Only the Russell 2000 was positive in December.
Global bond yields continued their downward slide last week. The US ten year finished 2014 at 2.17% and as low as that seems, it is 50 basis points in the rear view mirror as the yield plummeted last week to 1.67%. The German bund yields 0.30%, French OATs came in at 0.54%, the Swiss ten year remains negative at -0.04%, Spain yields 1.42% and Italy yields 1.59%.
In addition to the Swiss ten year trading with a negative yield so too do German bobls, their five year note, trade with a negative yield. Barron’s offered some commentary on negative yields;
By JPMorgan economists’ reckoning, some $3.6 trillion of government bonds traded at negative yields last week, equal to 16% of the universe they track.
It’s crazy to invest in a government-guaranteed loss, and with five-year German Bunds yielding minus 0.054%, their American counterparts’ 1.155% looks positively lush; even more so, the 30-year U.S. long bond, which fell to a record low yield of just 2.226%. As for the benchmark 10-year, it declined to just 1.644%, down about a half-percentage point since the turn of the year and, more importantly, back to virtually where it stood in May 2013 before the so-called taper tantrum, when the Federal Reserve warned of the eventual end of its bond-purchase program.
In foreign equity trading the Shanghai Composite was down 4.19% after going up 5.87% in the first three weeks of the year. The Nikkei 225 was up 0.93% for the week and 1.28% for the year, the Hang Seng down 1.39% but up 4.28% YTD and the ASX 200 was up 1.31% and 2.8% to start the year.
The DAX was up 42 basis points for the week 9.06% for the year, France down 85 basis points for the week and up 7.76% for the year, the FTSE 100 down 1.01% for the week and up 2.79% YTD. The Swiss Market Index up 3% for the week but down 6.66% for the year.
The Russian central bank was back in the news this week as it cut rates by 2% even though inflation is running at 13%, which is coincidentally what Russian ten year sovereign debt yields. The bank expects the rate of inflation to come down as the economy slows from ongoing sanctions.
In economic news, US GDP grew at an annual rate of 2.6% in the fourth quarter while the price deflator printed negative 0.1. This news was viewed as a disappointment, and along with other global macro news has contributed to the drop in yields last week and is raising doubt in some circles about the Fed’s timetable for raising rates. This coming Friday of course will be the January jobs report with consensus calling for 230,000 new jobs and for the headline unemployment rate to remain steady at 5.6%.
West Texas Intermediate Crude oil went on a wild ride last week. It was down very slightly on the week going into Friday. The price then proceeded to rocket higher by 7.26%, 6.84% for Brent, to close out the week. The gain was generally attributed to a drop in the rig count in the US and Canada.
The other big news last week was the IPO for Shake Shack (NYSE: SHAK) which priced at $21, versus a range of $17-$19, and promptly went up 118% to close at $45.90 after printing above $50 shortly after the shares opened for trading.
ETF News & Data
And the unwinding of the year end inflow to the SPDR S&P 500 is now complete with a $6.4 billion outflow last week. We have been tracking the SPDR flows when we noticed a $25 billion inflow in the final week of the year and then the subsequent reversal of that $25 billion every week in January.
The leader on the inflow side of the ledger was the WisdomTree Europe Hedged Equity ETF which as the name implies, owns European equities while hedging out the euro’s currency risk. The fund had a $1.8 billion inflow perhaps as a reaction to the announced QE by the European Central Bank in the previous week.
UrbanPhoto looked at the living conditions of Hong Kong apartments in an article titled How To Live In A Shoebox. The apartments are very small, the building materials are often ill-suited for the climate and the layouts tend to be very choppy with small rooms.
What’s wrong with a typical Hong Kong apartment? Lots. Not only is the average apartment just 450 square feet in size, it is loaded with features that make it less, rather than more, liveable. There are bay windows, tiny rooms, odd layouts, unusably small balconies and a complete lack of storage space.
Techrepublic had a fascinating article that looks at Stadiums Race To Digitize in a bid to keep up with the changing demographic of their fan base as well as provide a better overall fan experience. The first paragraph captures the idea but the entire article is great read for sports fans.
Imagine walking into a stadium and your smartphone immediately pings you that a $30 premium seat upgrade is available for purchase on your mobile device. As soon as you settle in to enjoy that awesome view of the game, you use your smartphone to order a pulled pork sandwich and imported beer delivered right to your seat. Then, when your favorite player scores a touchdown, you use the team’s app to watch an instant replay at multiple angles and a stadium-exclusive video feed of the players on the sideline.
AdvisorShares ETF Strategist
Source: Google Finance, Yahoo Finance, Wall Street Journal, Bloomberg, Barrons, ETF.com, XTF.com, Convergex, Techrepublic, UrbanPhoto
For January 26, 2014 to January 30, 2015
S&P Sector Analysis
As for the sectors of the S&P 500, seven outperformed the broad benchmark – Materials, Discretionary, Utilities, Energy, Telecom, Healthcare and Industrials. The remaining three – Financials, Staples and Technology – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 2.89% this week, with Materials outperforming all, and Technology coming in last.
For January 26, 2014 to January 30, 2015
As measured by the S&P 500 sector indices, respective performances were: