AdvisorShares Weekly Market Review – Week Ending 4/1/2016
Highlights of the Prior Week
First Quarter Ends With A Meh!
A funny thing happened on the way to the quarter end; the tight correlation between WTI and the equity market appears to be broken as their fortunes diverged sharply last week with the S&P 500 rallying 1.81% while West Texas Intermediate Crude fell 7.70%; more than 4% on Friday alone.
The rally last week lifted the broad market into positive territory for the quarter; 1.50% for Dow Jones Industrial Average and 77 basis points for the S&P 500 (plus another 55 basis points for the dividend). The NASDAQ and Russell 2000 weren’t so lucky, falling 2.75% and 1.93% respectively.
All of the foreign markets we regularly cover in this report were down, significantly in some cases, for the quarter. The DAX fell 7.24%, the CAC 40 dropped 5.43% and the FTSE 100 did well to only drop 1.08%. Declines in Asia were steeper; the Shanghai Composite gave up 15.12%, the Nikkei 225 slid 11.95% while the Hang Seng declined 5.05% and the ASX 200 dropped 4.18%.
The Nikkei further extended its decline on Friday by an additional 3% due to a poorly received Tankan survey. There of course was market moving economic data in the US on Friday as well. First was the labor situation with 215,000 new jobs reported, the unemployment rate inched up to 5.0%, the broader U6 printed at 9.8%, the labor force participation rate moved up to 63.0% while wages increased by 0.3%. Embedded in the data was a 29,000 decline in the manufacturing sector which may have contributed to the early morning decline in equities. Lifting equities out of their funk may have been the March ISM report that its manufacturing index came in at 51.8 (expansionary) after printing at 49.5 (contractionary) in February.
The first quarter was in part dominated by central bank headlines that might leave investors wondering if policy is being made up on the spot. The Bank of Japan embarked on a NIRP policy which had the immediate opposite of what was intended effect as the yen rallied sharply. The ECB is buying more debt than it originally intended and moved policy further into negative territory without much success where success is measured by favorable economic data. And at home FOMC members and other Fed Governors seem to be stumbling over each other to give contradictory speeches to anyone who will listen, we’ll spare an attempt at an April Fools joke about Neel Kashkari having a speaking engagement with Wayzata, MN PTA.
We should also note the better than 15% rise in gold and even larger gains, broadly speaking for the gold miners. A point made here for many months is the extent to which gold continues to do what investors should hope it does, which is to look different than the stock market.
On Monday there was news of a massive data leak from a Panamanian law firm which chronicles tax evasion of very wealthy and very powerful people including 11 world leaders that has occurred over the last 40 years. This is being called the Panama Papers and is still a developing story.
ETF News & Data
Fund flows last week was a story of on the one hand…but on the other as funds tracking the NASDAQ 100 led inflows while funds tracking the Russell 2000 led the outflows. There were net creations for energy and other stray market segments and redemptions from health care, banks and gold.
John Hancock launched five multifactor, domestic equity sector funds last week.
Outside Magazine reports that Reggie Miller Will Drop You on the mountain bike trails near Malibu;
“I moved to Malibu in 2000. I was eating at a restaurant, and Tim Commerford, bassist for Rage Against the Machine and a huge workout fanatic, came up to me. He said, ‘Hey, you should come out riding with us.’ ‘Us’ ended up being Tim, Laird Hamilton, and this guy we call Wild Man, who used to own a chain of fitness gyms. He’s over 80 years old.”
As the NCAA College Basketball Tournament winds down ESPN reported that the NCAA Errantly Told South Carolina Gamecocks They Were In The Tourney;
“Unfortunately, during the selection show a junior men’s basketball staff member mistakenly sent a text to a member of the University of South Carolina athletics department staff via an app we used for the first time during the 2016 tournament. The text was supposed to go to all teams, congratulating them for making the tournament. Regrettably, a text meant for another institution went to South Carolina instead.
For March 28th, 2016 to April 1st, 2016
S&P Sector Analysis
As for the sectors of the S&P 500, four outperformed the broad benchmark – Technology, Staples, Discretionary, and Healthcare. The remaining six – Utilities, Financials, Materials, Industrials, Telecom, and Energy – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 4.00% this week, with Technology outperforming all, and Energy coming in last.
For March 28th, 2016 to April 1st, 2016
As measured by the S&P 500 sector indices, respective performances were: