AdvisorShares Weekly Market Review – Week Ending 4/25/2014
Highlights of the Prior Week
Domestic markets, as measured by the S&P 500, finished the week flat with a 0.1% decline but that result obscures what was a actually a noteworthy week.
News that got a lot of attention was about hedge fund manager Bill Ackman from Pershing Square Capital Management but for a change the news had nothing to do with Herbalife. Ackman entered into a partnership with a public company to make an offer on another public company. The partnership was with Valeant Pharmaceuticals (NYSE: VRX) which ultimately wants to acquire Allergan (NYSE: AGN). VRX needed Ackman to buy shares of AGN to legally bypass reporting requirements. Ackman amassed a 9.7% stake in AGN knowing a takeover offer was coming, benefitting Ackman of course and fulfilling the terms of the partnership.
There appears to be no debate on the legality of this only whether or not laws allowing this sort of deal should be changed. If they are not changed then there will be more deals like this.
Many momentum names got crushed on Friday perhaps stemming from a soured response to Amazon’s earnings Thursday after the close. Its shares were down 9.88% on Friday. Twitter was down 7.16% and Facebook was down 5.19%. Year to date Amazon is down 23%, Twitter is down 34% but Facebook has managed to add 5% this year despite an 18% decline over the last six weeks.
Portfolio manager Christopher Zook was quoted in Barron’s this week as saying “the market’s looking tired, it’s not a good sign that the utilities sector, up 13% this year, is by far the best acting group in the market.”
This week on Friday will be the April non-farms job report with early estimates pegged at an increase of 215,000 but not before the Federal Open Market Committee gets together for a regularly scheduled meeting.
Foreign markets were a mixed bag last week with large moves in both directions. On the upside the ASX 200 in Australia was up 1.89% which was identical to the lift for the FTSE 100 in the UK. The CAC 40 was up 1.78% with the DAX bringing up the rear with a 0.93% gain.
The Nikkei dropped 0.6%, the Hang Seng down 3.39% and the Shanghai Composite down 2.92%. Those three Asian markets have struggled in 2014 with declines of 11.43%, 4.39% and 3.76% respectively.
China continues to be an incredibly complicated investment destination for its immense potential but the broad market continues to languish. The Shanghai Composite is up 24% over the last ten years and only ⅓ of where it was at its 2007 peak.
ETF News & Data
This week’s creations and redemptions appear to capture a sector rotation with positive flows into the Energy Sector SPDR (NYSEARCA:XLE), Financial Select SPDR (NYSEARCA:XLF) Industrial Select SPDR (NYSEARCA:XLI) and Technology Select SPDR (XLK) and net redemptions from both the Healthcare Select SPDR (NYSEARCA:XLV) and the Consumer Discretionary Select SPDR (NYSEARCA:XLY). XLE, XLF, XLI and XLK were all in the top five for creations last week.
XTF.om reports two new funds last week; iShares Yield Optimized Bond ETF (NYSEARCA:BYLD) and the EGShares Blue Chip ETF (NYSEARCA: BCHP)
In the last couple of months writing our market update we have looked a couple of times in the Interesting Reads section at something called the Tiny House Movement. This week we circle back to the theme in an article from Houzz.com about a woman named Dee Williams who discovered the movement about ten years ago after a life altering medical diagnosis.
She realized she was not happy in the rat race so she quit her job and moved into a “tiny house” for a dramatically cheaper lifestyle that would allow her to only work part time while pursuing her passions in life, which appear to be volunteering and writing about tiny house living.
The point is not that everyone should go to the extreme moving into an 84 square foot trailer as Ms. Williams has done but to not wait for some sort of scare as a catalyst to live the life you want and that perhaps on the path to that life there is room for some downsizing and simplification. There is no doubt more people living in 5000 square foot houses than need to be.
It was alleged over the weekend that Los Angeles Clippers owner Donald Sterling made shockingly racist statements in a recorded phone call with his girlfriend. This has possibly happened before with Sterling based on comments from former player Baron Davis.
New NBA commissioner Adam Silver will seek to verify that it is indeed Sterling’s voice on the recording before any action is taken.
Clippers players wore their warm-ups inside out in Sunday’s game which they lost to the Golden State Warriors tying the series at two games apiece.
Roger Nusbaum, AdvisorShares ETF Strategist Source: Google Finance, Yahoo Finance, ETF.com, Barron’s, XTF.com, houzz.com, WSJ, TMZ, Fansided
Weekly ETF Flows
For April 21, 2014 to April 25, 2014
S&P Sector Analysis
As for the sectors of the S&P 500, four outperformed the broad benchmark – Materials, Healthcare, Financials, and Industrials. The remaining five – Energy, Technology, Discretionary, Staples, and Telecom, – each underperformed. Utilities had no change. The dispersion between the top-performing and bottom-performing sectors increased to4.39% this week, with Materials outperforming all, and Telecom coming in last
For April 21, 2014 to April 25, 2014
Sector performances, as measured by the S&P 500 sector indices were: