AdvisorShares Weekly Market Review – Week Ending 4/27/2018
Highlights of the Prior Week
Detente On The Korean Peninsula?
In what would seem to be an epic development, peace may be coming to the Korean peninsula after seven decades. The two sides say they have agreed to end the war (there hasn’t actually been fighting in a long time of course) and to denuclearize among other things. This could be important economically for the two Koreas from the standpoint that the South has roughly 50 million people and the North has 25 million, not huge globally but important locally. We will hope that this actually happens but admit to being puzzled as to why there wasn’t a bigger reaction in the markets. When it appeared tensions were escalating markets declined some, even if not for long. Also, we have to wonder, as odd as it seems, if President Trump’s Little Rocket Man Twitter insults helped this along? They did not make it worse…we guess.
Equity markets were beholden to earnings last week, starting out moving lower on weak industrial and staples earnings reports and then lifted on tech and internet retailers later in the week. The Dow Jones Industrial Average fell six basis points from the previous Friday’s close, the S&P 500 dropped less than a quarter of one point while the NASDAQ and Russell 2000 had similarly miniscule declines.
GDP for the first quarter was a mixed bag of good and bad leading to meh. The headline read of 2.3% exceeded estimates (good) but still was way behind last quarter’s 2.9%. Also consumer spending could only squeeze out growth of 1.1%.
There has been something of a fascination around Wework’s bond issue that came to market late last week, priced to yield 7.9%. The company has a high cash burn rate, a negative free cash flow and needs even more funding. The company is of interest as a possible tech 2.0 game changer but not everyone thinks it is actually a tech company. We are not attempting to assess the merits of the company or this particular bond issue but the popularity of the bonds speaks to a still prevalent sentiment to take risk/chase yield and that behavior becomes a problem at some point even if it turns out this particular issue is perfectly fine.
Checking in on more widely followed bond market proxies, the yield on the Ten Year US Treasury Note closed Friday at 2.95% after spending a little time above 3.00% mid-week. The Two Year Treasury Note made its way up to 2.48% leaving that widely followed spread at 48 basis points. And in case this happened without you being aware, the 12 month t-bill now gets you 2.24%.
This will be my final weekly Market Update here at AdvisorShares as I will be moving on. Thank you for reading these commentaries over the last four-plus years. I will still be blogging regularly at ETFmaven.com and hope you will consider following me there. Thank you
Bloomberg recently adopted a traffic light system (green, yellow, red) for evaluating ETFs. The ETF Educator gives us the lowdown on how it as well as other rating systems work.
What if ETFs were required to provide key data points to investors in the same manner that the FDA requires a nutrition facts label for food? Perhaps the label would include expense ratio, weighting methodology, concentration of holdings, trading spreads, use of leverage, etc. Would that help solve the problem? (answer: maybe?)
Now cannabis is good for us (we get that) but vitamins are not?
Gradually, scientific studies started to show that food was not nearly as dangerous as thought, and that vitamin and mineral supplements could do harm. There was data showing that calcium supplements did not decrease the risk of fracture and might increase the risk of kidney stones. A large-population study found that less than 3 percent of subjects were deemed deficient in iron, but around 13 percent had levels that were dangerously high.
Are you a fan of Pardon the Interruption on ESPN? Tony Kornheiser has some thoughts on who might ultimately replace him and partner Michael Wilbon:
Well on his podcast Wednesday, Kornheiser offered a prediction for the show’s future. When he and Wilbon move on, he said, he expects ESPN colleagues Pablo Torre and Bomani Jones to take over.
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, TheETFEducator.com, Awful Announcing