AdvisorShares Weekly Market Review – Week Ending 2/26/2016
Highlights of the Prior Week
Making The Most Of A Messy Market
Domestic equities had a volatile ride to a second straight week of gains. There was some economic data, most notably GDP which was revised up from 0.7% to an annual growth rate of 1.0% but as Marketwatch pointed out most of the upward revision was attributed to a build in inventories and markets fell slightly Friday thus not contributing to the gains. It is possible the market moved higher just working off a previously oversold condition.
For the week the Dow Jones Industrial Average was up 1.50%, the S&P 500 gained 1.57%, the NASDAQ added 1.88% and the Russell 2000 was good for 2.67%. Most foreign equities markets were up as well. The DAX added 1.33%, the CAC 40 was stronger by 2.17% and the FTSE 100 moved ahead by 2.45%. Asian markets were more mixed with the Nikkei 225 strong for a third week in a row gaining 1.43% and the Hang Seng Index tacked on 41 basis points while the Shanghai Composite fell 2.25% and the ASX 200 gave up 1.47%.
The yield on the Ten Year US Treasury Note was also volatile touching 1.65% Wednesday morning as equity markets were hitting their lows but closed out two basis points higher at 1.76%. The German bund yield moved down to 0.15%, the French OAT yield fell six basis points to 0.50%, the Swiss ten year went the furthest into negative territory since it first went negative down to -0.38%, Spain now yields 1.57% and Italy comes in at 1.51%. We should also note that JGBs also carry a negative yield now that the Bank of Japan has adopted a negative interest policy.
The European bond market has broken through the lower end of its recent range perhaps due to the threat of the Brexit, the proposed exit from the Euro Zone by the UK. This issue caused instability in currency markets. The British pound fell more than 3%, breaching $1.40 for the first time since the financial crisis and euro gained 1.25% against the pound. The reaction in gilts, the UK Ten Year Note was muted, going up just three basis points to 1.39%.
Commodities fell into line in light of rising equities. West Texas Intermediate Crude rose 1.64% and gold fell 50 basis points. As the energy sector has rotated into the spotlight in terms of influencing markets we pass along a nugget from Bespoke Investment Group who notes that short interest as a percentage of float in the energy sector now stands at 12.5% which is the highest reading for the sector in more than ten years. Some view this sort of data as being contrarian.
The Up & Down Wall Street Column this week devoted a lot of words to the movement afoot to remove large denomination bills from circulation, most notably the $100 bill, the €500 note and the CHF1000 note. Barron’s believes the concern about large bills being favored by drug dealers and other criminals is overstated but does make the following observation;
Outside the U.S., there does seem to be a recent pickup in demand for big bills. Last week, The Wall Street Journal reported a sharp increase in CHF1,000 notes in circulation, each worth roughly 10 U.S. C-notes. And in Japan, there has been a run on safes to store yen notes, the Journal related. There’s no suggestion of an increase of illegal activities that would utilize big stashes of cash in either country. Rather, it seems to be a reaction to the imposition of negative interest rates.
The new week started with a couple of significant item that could influence markets. Inflation in Europe posted a negative print for February, China lowered its required reserve ratio (a stimulative move) after having just raised it ten days ago and not much came from the G-20 meeting over the weekend about how to stimulate global growth.
ETF News & Data
Although not exactly news related to ETFs, the first and much talked about Eaton Vance exchange traded mutual fund began trading on Friday. There is still a lot to be learned including, according to the Wall Street Journal, where to actually trade ETMFs.
Fund flows were dominated by large flows into gold and even larger flows out of the S&P 500. High yield also saw large inflows and riskier equity sectors like the NASDAQ 100, Russell 2000 and biotechnology all made the outflow leaderboard.
There were four new funds last week including a couple of index funds from Janus (its first ETFs since buying VelocityShares) and a couple of fund focusing on yield.
Car enthusiast might be interested to know that according to Mashable, The World’s Fastest Electric Car Is Made In…Croatia?
Thanks to its 1,088-horsepower (provided by an 8,450-cell battery pack), the all-wheel-drive Concept_One will do 0 to 62mph in around 2.6 seconds, with a top speed of around 220 mph. Not only is that fast by, say, Tesla standards, that’s fast by any standard. Some aircraft would have trouble keeping up.
As spring training ramps up, the biggest story so far might be Yoenis Cespedes’ One-Man Auto Show. He’s drawn attention by driving a series of custom vehicles to work every day including a Lamborghini Aventader and something called an Avorza Polars Slingshot. Cespedes signed a three-year $75 million contract with the Mets and based on New York Magazine’s account he spent about $1 million on his new car collection. Here’s hoping he has someone helping him with his money and the wild spending spree is over, or better yet maybe the cars are just loaners.
Apparently he’s not one of those guys who won’t let anyone touch his car, either. On Wednesday, after expressing a preference for round waffles over the square ones served in the team’s training facility (really), Cespedes asked a Mets staffer if she’d take his car and go buy a round-waffle-maker.
Source: Google Finance, Yahoo Finance, Wall Street Journal, SeekingAlpha, Bloomberg, Reuters, Barrons, ETF.com, XTF.com, Bespoke Investment Group, NY Magazine, Mashable
For February 22nd, 2016 to February 26th, 2016
S&P Sector Analysis
As for the sectors of the S&P 500, four outperformed the broad benchmark – Materials, Discretionary, Industrials and Healthcare. The remaining six – Financials, Technology, Telecom, Staples, Energy and Utilities – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 3.22% this week, with Materials outperforming all, and Utilities coming in last.
For February 22nd, 2016 to February 26th, 2016
As measured by the S&P 500 sector indices, respective performances were: