AdvisorShares Weekly Market Review – Week Ending 3/7/2014
Highlights of the Prior Week
Over the weekend the current bull market celebrated its fifth anniversary as the S&P 500 Index tacked on another 1% gain last week and is now up 1.6% for the year and up 7.8% from the early February low after starting 2014 with a 5.7% decline.
It is of course well known that at five years, the current bull market is long in the tooth. The longer it lasts and the further we move from the last bear market the greater the chance that market participants will again react with fear to the next serious decline. Despite falling 50% in tech wreck and then recovering many reacted to the financial crisis as if a 50% decline had never happened before.
While trying to predict when the next big decline will come is nothing more than a guess, when it does come investors will be counting on their advisors to remain unemotional and disciplined.
The jobs report surprised to the upside with a gain of 175,000 last month defying bad weather and estimates calling for 145,000-150,000. The headline unemployment rate ticked up to 6.7% while the broader U-6 number downticked to 12.6%. Not surprisingly the US Ten Year Treasury Note did not take the jobs report well as it broke out of its two week range to close last week with a yield of 2.79%.
In Spinal Tap terms, the story in Ukraine ratcheted back down a notch or two from eleven but the situation is still rife with uncertainty. After an immediate 12% drop for Russian equities last Monday that market clawed some of its decline back to finish out with an 8.6% drop. The DAX index in Germany is proving to be the most sensitive to Russian political dynamics closing the week down almost 1% according to Yahoo Finance versus small gains in the UK and France.
Interestingly even though Russia is one of the BRIC markets and has a large weight in many broad based emerging market indexes and ETFs, the iShares MSCI Emerging Markets ETF (NYSEARCA: EEM) finished the week with a very slight gain after taking back a 2.5% decline on March 3, the day that Russian stocks dropped 12%.
ETF News & Data
XTF.com reports four new ETFs so far in March. In addition to the AdvisorShares YieldPro ETF (NASDAQ: YPRO) there was one China A-Share ETF, one smart beta fund of funds and one broad-based Korea ETF listed so far this month.
The top of the ETF.com creations and redemptions board showed a shift to risk-on over the last week. The largest creates were in iShares Core S&P 500 (NYSEARCA:IVV) at $2.9 billion followed $1.4 billion into the ProsShares Ultra Russell 2000 (NYSEARCA: UWM) and $1.3 billion into the ProShares Ultra S&P 500 (NYSEARCA: SSO).
Fixed income dominated the redemption side of the ledger led by iShares 1-3 Year Treasury Bond (NYSEARCA: SHY) at $3.8 billion, iShares 3-7 Year Treasury Bond (NYSEARCA: IEF) $3.4 billion and the ProShares Ultra 7-10 Year Treasury (NYSEARCA: UST) with $2.1 billion. Interestingly the other big S&P 500 fund, the SPDR S&P 500 (NYSE:SPY) had $763 million in redemptions.
Outside Magazine looked at a possible link between the increase in the number of runners during times of hardship or adversity and the fight or flight response in humans. Quite simply, “When the Going Gets Tough, We Runners Get Going.” When people run they suffer and “there’s something about suffering (even in a trivial way) again and again—then living through it every time—that creates this wellspring of strength and resilience.”
A bonus interesting read was about a small cabin that is actually an RV. More interesting than the story about the cabin was the embedded opinion that there is a “tiny house movement where people are living with a smaller financial, environmental, and physical footprint.”
To the extent that a smaller financial footprint means less debt and less needless spending then maybe financial footprints are shrinking but where the trends of fewer defined benefit plans and more defined contributions will persist then more Americans will end up with an IRA rollover at some point and will need to have some sort of engagement with that pool of money. If the MyRA ever happens this would be another enlargement of the financial footprint for Americans who don’t end up participating in a 401k or only do so for a short period of time and not their entire career.
Anyone who watches Sportscenter on ESPN on even a semi-regular basis will be aware of the back and forth for this year’s NBA MVP award between LeBron James and Kevin Durant. This started a couple of months ago and appears to not be entirely media hype as the players engage in the conversation.
While both teams (the Heat and Thunder) are in first place, talking about individual awards for half the season takes away from what should be the teams’ priority of winning.Roger Nusbaum AdvisorShares ETF Strategist
Weekly ETF Flows
For March 3, 2013 to March 7, 2014
S&P Sector Analysis
As for the sectors of the S&P 500, just three outperformed the broad benchmark – Financials, Industrials, and Materials. The remaining seven – Discretionary, Staples, Telecom, Technology, Energy, Healthcare, and Utilities – each underperformed. The dispersion between the top-performing and bottom-performing sectors rose to 4.20% this week, with Financials outperforming all, and Utilities coming in last.
For March 3, 2013 to March 7, 2014
Sector performances, as measured by the S&P 500 sector indices were: