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Posted by on Jun 20, 2016 in ETF Strategist, Market Insight

AdvisorShares Weekly Market Review – Week Ending 6/17/2016

AdvisorShares Weekly Market Review – Week Ending 6/17/2016

Highlights of the Prior Week

“Zombie Fed”

Macro

A big story last week (lately, every week) was of course the FOMC decision not to raise in June (no surprise), its appearance of backing even further away from July ( the futures market is pricing in a 7% chance of a July hike as of last Friday versus a 22% chance the previous Friday) and a now growing sentiment that there will only be one hike this year which is down from two expected hikes this year which was down from an expectation of hiking four times this year.

Jeff Gundlach offers the following assessment of the FOMC, courtesy of our friends at Seeking Alpha:

“Central banks are losing control and they don’t know what to do,” Jeffrey Gundlach said ahead of the FOMC announcement. “The Fed is confused and their confusion spills into investor psychology… it seems every other week the message is different. They’ve turned into the Zombie Fed.” The bond guru also noted it was a “dangerous price appreciation game” to purchase German Bunds at current levels and that gold and gold miners are still attractive.

Also stirring things up a bit was the Bank of Japan’s decision to stand pat despite expectations for a negative CPI. This was a catalyst for yen strength (the dollar fell 2% against the yen) which is of course the last thing the BoJ wants to see. The Swiss National Bank and Bank of England both also kept policy rates at very accommodative levels last week. In other central bank news Raghuram Rajan, head of the Reserve Bank of India is stepping down after only three years at the helm.

Equities rolled over for the week with the Dow Jones Industrial Average falling 1.07%, the S&P 500 gave up 1.18%, the NASDAQ slid 1.92% and the Russell 2000 was off 1.63%. All of the foreign markets regularly followed in this report were also lower. The DAX was down 2.07%, the CAC 40 fell 2.85% and the FTSE 100 shed 1.75%. In Asia, the Shanghai Composite dropped 1.44%, the Hang Seng Index had a particularly rough 4.1% decline while the Nikkei dropped an even larger 6.04%.

This week the UK will vote on whether to leave the European Union or stay in it, the so called Brexit vote. A few months ago, this was a fringe idea along the lines of whether Scotland would vote to leave the UK but of course the Brexit movement gained momentum and seemed very plausible. Over the weekend yet another poll had odd of the Brexit now receding which has lifted global markets.. As disruptive as this might be, the thought, or fear, is that if the UK leaves the union that other countries will then also want to leave which would make for an economically painful adjustment.

The yield action in global sovereign debt continues to look desperate. The Ten Year US Treasury Note now yields 1.61% but was as low as 1.52% early Thursday. The German bund yield was negative for most of the week before a strong rally on Friday took the yield back up to a positive two basis points. With the Brexit vote looming the gilt yield dropped slightly on the week to 1.14%, the Swiss ten year is down to -0.46% and the JGB closed the week at -0.15%.

West Texas Intermediate Crude took a tumble in the first half of the week due in part bearish supply data, but staged a big turnaround on Friday to close essentially flat at $48.26. Gold was also strong, rallying 2% and closing above $1300.

ETF News

For the third year in a row, MSCI Indexes decided to keep Chinese A Share companies out of its emerging market indexes. If or when A Shares are added it would likely lead to meaningful changes to the index composition affecting billions in indexed, emerging market assets.

There were nine new funds launched last week including a suite of sustainable-themed funds from Columbia and a China A Share ETF from iShares.

Sports

The Cleveland Cavaliers NBA championship brought with it all kinds of fund facts related to the Cavs being able to overcome a 3-1 deficit, also being city’s first championship since 1964 but also one that may have sneaked by which is that LeBron James is only the third player in league history with a triple double in an NBA Finals game 7 joining Jerry West and James Worthy who each did it for the Lakers.

There are two important soccer tournaments going on in June; the Copa America and the UEFA European Championship. One longshot in the UEFA according to ESPN FC is that Iceland Competing At The EURO 2016 Defies Explanation;

“This is the biggest moment in Icelandic football history,” said Heimer Hallgrimsson, the dentist coach, not the Swedish one. (That’s Lars Lagerback.) “We have to be aware of not being too sentimental when we play … For the fans back home in Iceland, they’ve certainly waited a long time for this moment.”

Yes, one of the coaches is a dentist.

While Source: Google Finance, Yahoo Finance, Wall Street Journal, SeekingAlpha, Bloomberg, Reuters, Barrons, ETF.com, XTF.com, Bespoke Investment Group, ESPN FC
 

2016.06.20_Table1
 
For June 13th, 2016 to June 17th, 2016

2016.06.20_Table2
 
S&P Sector Analysis

As for the sectors of the S&P 500, seven outperformed the broad benchmark – Telecom, Utilities, Energy, Discretionary, Staples, Industrials, and Materials. The remaining three – Financials, Technology, and Healthcare – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 3.40% this week, with Telecom outperforming all, and Healthcare coming in last.

For June 13th, 2016 to June 17th, 2016

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

2016.06.20_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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