AdvisorShares Weekly Market Review – Week Ending 3/27/2015
Highlights of the Prior Week
First Quarter Closing On A Deceptively Volatile Note
Last week was generally quieter than the week before in terms of news but volatility in the asset classes was alive and well. Domestic equity indexes were down across the board. The Dow Jones Industrial Average fell 2.31%, the S&P 500 gave up 2.25%, the NASDAQ dropped 2.69% and the Russell 2000 was in the red for 2.04%. As the first quarter winds down this week, the Dow and the S&P are flirting with breakeven and face the prospect of a negative first quarter.
There was economic data that wasn’t necessarily bad but most certainly were not strong. GDP for the 4th quarter held steady at 2.2%, CPI inflation reported 0.0 overall and up 1.7% excluding food and energy and durable goods, which is a volatile series, declined 1.7% versus an expected rise of 0.2%
The foreign equity markets we regularly follow here did not fare much better except the Shanghai Composite which was up 2.05% and the Hang Seng which added 51 basis points. The Nikkei 225 fell 1.41%, the ASX 200 in Australia fell 0.93%, the FTSE 100 gave back 2.39%, the CAC 40 down 1.02% and the German DAX was off by 1.42%.
Japan reported that its CPI 0.0 versus the Bank of Japan’s target of 2% which raises deflationary concerns which have plagued that country for many years. Japan is often cited as having a demographics problem (average age 44.6 in 2010) which some believe contributes to the deflationary threat. Europe and the US (close to 40 and 36 respectively) also have demographics problems, but not as bad as Japan, and they are both trying to stave off their own deflation.
Global yields were generally higher last week. The US Ten Year Treasury Note closed the week at 1.94%, the German bund 0.21%, the French OAT 0.50%, the Swiss Ten Year -0.02%, Spain 1.32% and Italy 1.35%. And if you’re keeping track, Greece is the only one of the PIIGS that yields more than the US.
The dollar was generally weaker as both the euro rallied and the dollar declined against the yen. The British pound though was weaker against the greenback. Dollar weakness may have contributed to gold’s 1.38% gain. And how volatile was the oil market? West Texas gained 5.1% on the week despite falling 5.8% on Friday.
ETF News & Data
There were four new funds launched last week including two new hedge fund replicators from IndexIQ. These of course fit into the more general category of liquid alternatives which is proliferating due to mounting interest rate risk in more traditional fixed income sectors. While not all liquid alts are fixed income proxies, some are and at some point investors will need to explore allocating away from interest sensitive exposure.
Most notable from last week’s inflows/outflows was the large exodus from funds with the word dividend in the name. Four of the top ten were dividend oriented equity ETFs totaling $6.7 billion.
As a bit of a mind bender, Second Nexus reports that the scientists working at the Hadron Collider in Geneva, Switzerland will conduct an experiment that they hope will lead to the discovery of a parallel universe.
If successful a completely new universe will be revealed – rewriting not only the physics books but the philosophy books too.It is even possible that gravity from our own universe may ‘leak’ into this parallel universe, scientists at the LHC say.
We don’t understand it either but it is interesting.
ESPN had a profile of LaQuan McGowan, the 6’7”, 400 pound tight end on Baylor University’s football team. You may remember him from when he caught a touchdown pass in the Cotton Bowl. His contact during the team’s practice is limited due to his size. When he was in high school he wanted to play basketball but the school had trouble finding size 22 basketball shoes for him, even the Dallas Mavericks could not help. They were able get shoes for him through Shaquille O’Neal.
Source: Google Finance, Yahoo Finance, Wall Street Journal, Bloomberg, Barrons, Business Insider, ETF.com, XTF.com, Convergex,ESPN, Ritholtz.com, SecondNexus.com, Wikipedia
Weekly ETF Flows
For March 23, 2015 to March 27, 2015
S&P Sector Analysis
As for the sectors of the S&P 500, five outperformed the broad benchmark – Telecom, Energy, Financials, Materials and Discretionary. The remaining five – Industrials, Technology, Staples, Healthcare and Utilities – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 10.59% this week, with Telecom outperforming all, and Utilities coming in last.
For March 23, 2015 to March 27, 2015
As measured by the S&P 500 sector indices, respective performances were: