AdvisorShares Weekly Market Review – Week Ending 5/16/2014
Highlights of the Prior Week
The S&P 500 declined 3 basis points this week with the big day coming Thursday when well-known hedge fund manager David Tepper of Appaloosa Management warned investors not to be too “freakin’ long” in the current environment.
For the last few weeks we have been paying attention to the divergence between large cap and small cap domestic equities and that divergence persisted last week as the Russell 2000 fell 0.39%. The Russell had a large move up on Monday versus a flat SPX and proceeded to then decline 4.5% from Monday’s close into the Tepper-low Thursday morning.
At point in the middle of the sharp drop in small caps last week it was noted that the Russell 2000 had dropped 10% from its high putting it in “official correction” territory which lasted for about ten minutes (intentional hyperbole) which serves as an example of just how useless terms like “official correction” are.
Part of the Tepper fallout was a spike down in the yield on the US Ten Year Treasury which spent much of Thursday morning below 2.5% for the first time since last October. The ten year finished out the week at 2.51%.
The bond market has continued to confound investors as yields have moved lower despite the Fed’s continued reduction of asset purchases popularly referred to as tapering. Barron’s offered a simple and reasonable answer which is that the US economy simply is not all that strong and that 2.51% the yield offers relative value versus a German ten year yielding 1.3% and an Italian ten year yielding 2.9%.
ETF News & Data
The top ten funds seeing inflows this week were all equity ETFs with the SPDR S&P 500 (NYSEARCA:SPY), iShares Russell 2000 ETF IWM (NYSEARCA: IWM) and the PowerShares QQQ (NASDAQ:QQQ) leading the way.
Outflows were in a mish mash of funds ranging from domestic equity to foreign equity to fixed income and REITs.
The only new ETF this past week was an actively managed municipal bond fund from First Trust.
So apparently there are competitions for latte art, you know the design that the barista makes in the foam of your specialty coffee order that might look like a fern or a bird or in some cases a “rabid bat.”
The Wall Street Journal had a write up on the recent national competition where the winner will go to the world championship later this year in Australia. One of the comments on the article noted that this probably goes into the too much time on their hands file but it’s interesting if you like coffee and didn’t know such a thing existed.
Over the weekend the NCAA Mens Lacrosse tournament continued as the final 8 played down to the final four. One of the games pitted University of Albany against Notre Dame. Albany managed to get to a five goal lead,12-7, in the fourth quarter and announcers Eamon McAnaney and Quint Kessenich were declaring victory for Albany.
The Notre Dame players never stopped playing and the coaches never stopped coaching. Just like the cliche they came back one goal at a time with confidence growing with each successive goal. Notre Dame won in overtime 13-12.
This is a great example of why it is important to always play until the whistle both in sports and in life.
Roger Nusbaum, AdvisorShares ETF StrategistSource: Google Finance, Yahoo Finance, ETF.com, Barron’s, XTF.com, BloombergBusinessweek, Wall Street Journal
Weekly ETF Flows
For May 12, 2014 to May 16, 2014
S&P Sector Analysis
As for the sectors of the S&P 500, five outperformed the broad benchmark – Telecom, Technology, Healthcare, Materials, and Industrials. The remaining five – Discretionary, Utilities, Energy, Staples, and Financials – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 1.98% this week, with Telecom outperforming all, and Financials coming in last.
For May 12, 2014 to May 16, 2014
Sector performances, as measured by the S&P 500 sector indices were: