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Posted by on May 31, 2016 in ETF Strategist, Market Insight

AdvisorShares Weekly Market Review – Week Ending 5/27/2016

AdvisorShares Weekly Market Review – Week Ending 5/27/2016

Highlights of the Prior Week

Summertime & The Trading Is Not So Easy

Macro

Memorial Day is the unofficial start to summer although based on the low trading volumes last week it appears that a lot of people got a slightly earlier start to the summer. Right on cue to the unofficial start, Barron’s ran a feature highlighting million-dollar rentals in the Hamptons but you might find more financially friendly accommodations driving 20 more minutes to Montauk.

Low volume didn’t hold back domestic equities which were stronger across the board with the Dow Jones Industrial Average rising 2.10%, the S&P 500 gaining 2.25%, the NASDAQ adding 3.41% and the Russell 2000 tacking on 3.39%. Most of the foreign equity markets we follow in this report were also higher last week. The DAX jumped 3.73%, the CAC 40 rallied 3.56% and the FTSE 100 was good for a 1.86% lift. In Asia the Nikkei 225 inched up 59 basis points while the Hang Seng was up 3.66%, the ASX 200 added 1.02% but the Shanghai Composite fell 0.14%.

First quarter GDP was revised higher by 0.3% to 0.8% which is better than the first look of 0.5% but still a tenth or two below what was expected. This coming Friday markets are due for another jobs report estimated to be a fair bit below the recent trend of 200k with estimates calling for 160,000 just like last month.

In trying to glean what might be coming next for equities, Barron’s cited several plausible cases for lower prices in the near term but Bespoke Investment Group’s weekly report charted both the Russell 2000 and the High Yield bond market as bouncing dramatically from their respective February lows (you know this already) but also that both risk-on segments took back their 200 day moving averages and recently both found support at their 200 day moving averages. As we frequently say, there is always a bull case and a bear case and the recent strength is clearly one for the bulls.

The yield on the Ten Year US Treasury Note had a volatile ride to a mere one basis point gain to 1.85% which can be taken as either a sign of a flattening curve in light of Janet Yellen appearing to put a rate hike in play sooner than later or disbelief that the next hike will be in June as the Fed Funds Futures market only assigned a 34% probability as of last Friday. The German bund yield inched down to 0.13%, the French OAT came in slightly to 0.47%, the UK gilt yield fell in line and now pays 1.43%, the Swiss ten year costs 29 basis points (negative yield) and the JGB was flat at -0.11%.

West Texas Intermediate Crude had an interesting week rising 2.85% and spending quite a bit of time on Thursday above $50 for the first time this year. In the face of rising equities it should be no surprise that gold went the other way, last week falling close to 4%.

ETF News

Big news that could affect many index ETFs is that the S&P 500 as well as MSCI are going to recognize REITs as the eleventh sector. Previously of course, REITs were an industry within the financial sector. Barron’s reports that REITs would be the fourth highest yielding sector. Interestingly, mortgage REITs will remain as part of the financial sector. Look for the change to occur in later this summer.

There was only one new ETF last week as recent newcomer Elkhorn, run by former PowerShares executive Ben Fulton launched a fund that targets preferred stocks.  

Interesting Reads

For years the concept of the 1% has been a front burner talking point as awareness of the wealth gap has increased. The New York Times would have you consider How The Other Fifth Lives which broadens the discussion to explore social and geographic segregation of the top 20% and the political impact that is having on both the Democratic and Republican parties. One simple line that helps create context;

“Morally, I am a Democrat,” one of the participants commented, “but my wallet says I am a Republican.”

Sports

Could it be that Chris Berman Will Retire From ESPN At The End Of The NFL Season? Deadspin says yes although it has been denied by publically by his agent;

As TBL notes, Berman will retire rather than leave for a different network. He just turned 61, and he’s been with the company since it was founded. The decision to replace him is not expected to come any time soon. It could go all the way down to the start of the 2017 season.

Stay tuned.

Congratulations to the University of North Carolina Men’s Lacrosse team who won the national championship in overtime against the University of Maryland.

Source: Google Finance, Yahoo Finance, Wall Street Journal, SeekingAlpha, Bloomberg, Reuters, Barrons, ETF.com, XTF.com, Bespoke Investment Group, New York Times, Deadspin
 

2016.05.30_Table1
 
For May 23rd, 2016 to May 27th, 2016

2016.05.30_Table2
 
S&P Sector Analysis

As for the sectors of the S&P 500, two outperformed the broad benchmark –Technology and Financials. The remaining eight – Healthcare, Discretionary, Materials, Telecom, Industrials, Staples, Energy, and Utilities – each underperformed.  The dispersion between the top-performing and bottom-performing sectors was roughly 2.41% this week, with Technology outperforming all, and Utilities coming in last.
 
For May 23rd, 2016 to May 27th, 2016

As measured by the S&P 500 sector indices, respective performances were:

2016.05.30_Table3

 

david@mediaworksllc.com

The AlphaBaskets blog provides frequent market insight and commentary by AdvisorShares Investments, LLC, created by AdvisorShares and other leading active managers.  AdvisorShares Investments is an SEC-registered investment adviser and the investment adviser to the AdvisorShares actively managed ETFs. The views expressed on AlphaBaskets should not be taken as investment advice or a recommendation for any of the actively managed ETFs advised by AdvisorShares.

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