AdvisorShares Weekly Market Review – Week Ending 4/13/2018
Highlights of the Prior Week
“A Perfectly Executed Strike”
The US, with the help of allies, of course launched strikes into Syria and markets appear to be OK with the action as domestic equity futures were well in the green in Monday’s pre-market trading. There is plenty of precedent for markets rallying in the face of new military action but going in you never know what markets might do. While it doesn’t seem correct to think of military action as being noise, the sample size for positive reactions to this type of event is quite large.
Markets had a strong week. The Dow Jones Industrial average gained 1.8%, the S&P 500 was up 2% and the NASDAQ put on 2.8%. Interestingly, the energy sector has done some heavy lifting lately. A couple of the larger energy sector ETFs were up close to 6% last week. The financial sector had been helping until Friday when the sector was hit by one of the larger banks coming in light on earnings due to weak investment banking.
One of the big stories last week was Mark Zuckerberg’s testimony on Capitol Hill. We admit to first thinking the booster seat pictures were photoshopped but apparently they weren’t. This is, of course, an interesting and important story in terms of safeguarding our information and making the internet experience safe for users but the question isn’t whether the larger social media and internet 2.0 company track our data, it is what they do with it. As a practical matter, if you search for a particular type of watch or car, the algorithms are going to push ads to you for products that it thinks you are interested in. That is only common sense. There are ways to mitigate this some by changing browsing habits or using different settings on your browser. If the companies are doing nefarious things with the information it has, or are overstepping by going beyond your browsing and search history or are themselves truly getting duped then you should expect some sort of consequence. It is always funny to get a bunch of ads for something you already bought.
The yield on the US Two Year Treasury Note jumped eight basis points from the previous Friday to close this past Friday at 2.35%. The Ten Year Treasury Note moved up a little less which is of course a flattening of the curve. If the FOMC sticks to its stated, intended path of rate hikes then the long end of the curve needs to start moving up or there is a real risk of an inversion next year. We would note that the curve won’t be inverted until it actually inverts but the history of inversions is terrible.
The MICEX Index in Russia traded modestly lower on the week and is down a little more today but the ruble wasn’t as fortunate. XE.com had the dollar rising almost 7% against the Russian unit as sanctions appear to be ramping up in the aftermath of Skirpal poisoning. The latest news on Syria is unlikely to be a net positive as Vladimir Putin has of course for some inexplicable reason chosen to cast his lot with Bashar al Assad. There hasn’t been much impact on the ETFs tracking Russian indexes and Russia has very limited weightings in the broader based emerging market ETFs.
iShares launched a so called gun free ETF which ETF.com describes as “explicitly designed to exclude companies that manufacture and sell civilian firearms.” Regardless of your view on this issue, the conversation has certainly gotten louder since the Parkland tragedy and the issuance of the fund must mean that iShares believes there is enough interest in a product that excludes guns to sustain a profitable fund.
Remember a few months ago when Michael Novogratz made news by announcing the launch of a cryptocurrency hedge fund and then changed his mind? Well, there is a lot more to his story as captured by The New Yorker:
Novogratz had risen quickly, at Goldman Sachs and in the hedge-fund world, but each rise was met with a stunning, often humiliating reversal—first a parting with Goldman, in 2000, over what has been referred to in the press as “lifestyle issues,” and then the removal from his partnership, in 2015, at the high-flying Fortress Group after losing a series of currency bets.
If you haven’t had time to read about the Humboldt Broncos, here’s your chance.
Source: Google Finance, Yahoo Finance, Wall Street Journal, SeekingAlpha, Bloomberg, Ycharts.com, Reuters, Barrons, ETF.com, XTF.com, Zerohedge, Bespoke Investment Group, CME Group, Yahoo, Slate, Forbes, Awful Announcing, ICI