AdvisorShares Weekly Market Review – Week Ending 6/26/2015
Highlights of the Prior Week
Then It Was Back To Greece
News of whether there would be a big default in Europe continued to hang over markets as questions mount over whether or not Ukraine would be able to make their next interest payment which is due July 24th. Sadly, Greece is not the only default story hanging over markets as the world is still waiting for the Athens crisis to once and for all play out as it faces a we really mean it this time deadline for a €1.6 billion payment to the IMF.
Even then it may not resolve as Prime Minister Tsipras has rejected the proposed “blackmail,” and will impose capital controls, additionally banks and the stock exchange are closed on Monday as Greek citizens continue to take cash out in case the country reverts back to the drachma. Banks are expected to reopen on Thursday. Tsipras has called for a vote by the Greek people on July 5th to decide what to do. Barron’s joked (we think they were joking) that Greece should take its remaining euros and buy puts on the equity markets that it will cause to decline by its actions.
If that weren’t enough, the New York Times is reporting that Puerto Rico’s governor Alejandro Garcia Padilla says the island’s $72 billion in debt is not repayable. He says it’s not politics, it’s math. Puerto Rican debt has been popular for its higher yields and its exemption from state taxes no matter where holders live. This could have a large impact on municipal bond funds but this story is still unfolding.
Domestic equities took all the news to a lower close for the week with the Dow Jones Industrial dropping 37 basis points, the S&P 500 coughing up 38 basis points, the NASDAQ fell by 0.69% and the Russell 2000 decline 0.30%. Last week was obviously a busy one for the US Supreme Court and while we will not wade into political opinions here, the news was market moving within certain segments of the healthcare sector as hospital related stocks caught a bid.
Whatever is coming for Greece, or Ukraine for that matter, did not bother European equities last week as the FTSE 100 gained 72 basis points, France rallied 5.34% and Germany added 4.1%. But after thinking about it over the weekend and with ongoing developments, European equities are down 2-3% for many markets.
In Asia the Nikkei 225 chipped in with a 2.66% lift while Australia fell 91 basis points and the Hang Seng fell 0.38%. The big mover was Shanghai which, gulp, fell 6.37% in a four day week. More dramatically it fell 10.6% on Thursday and Friday and fell another 3% on Monday leaving it own more than 20% since June 12th. That is certainly a very fast decline bordering on a crash with plenty of possible reasons for the drop but none that would seem to trigger such an immediate cause and effect. Sometimes markets fall for no reason at all.
Again this past week there was more action in the bond market than equities, at least domestically as the US Ten Year Treasury Note yield backed up 21 basis points to 2.47% which is the high yield for 2015. Various news outlets attributed the rise to expectations that a deal for Greece would get done, which removes the fear bid, and the data has generally been strong or at the very least–not weak.
Yields in Europe were a mixed bag as the German bund rose to 0.92%, the French OAT moved up 13 basis points to 1.29% and Switzerland two basis points to 0.17%. Spain fell 16 basis points to 2.11% and Italy dropped to 2.15%.
Commodities headed lower with West Texas Intermediate Crude having a volatile ride to a 52 basis point decline while gold fell 2.09%. The euro declined 1.77% against the dollar while the British pound gave up 0.80% to the greenback and the dollar rose 0.57% against the yen.
ETF News & Data
It was a busy week with eight new funds including ProShares throwing its hat in the currency hedged equity ring with funds targeting Japan and Europe. Also noteworthy was news reported by ETF.com that iShares will be closing 18 funds in August including several foreign, small cap equity funds and quite a few bond funds.
Fund flows saw widespread outflows from domestic equity funds of various cap sizes while inflows were a mish-mash of equities, fixed income and commodities.
The California Sunday Magazine had a fascinating story titled L.A. to Nepal America’s First Responders, California Task Force Two Follows Disaster Around The World.
McKeen, Gonzales, and Prasch are members of an elite search-and-rescue team known as California Task Force Two. Composed of firefighters, doctors, and engineers, the task force is sort of the seal Team Six of disaster aid. When the biggest catastrophes hit anywhere in the world, these men and women leave their station houses, hospital wards, and office cubicles and rush to a sprawling base in northern Los Angeles County. Within hours they are wading through flooded streets, digging through the rubble of collapsed buildings, finding and rescuing survivors. The engineers scramble to determine the safest way to access damaged buildings. The physicians tend to the injured, sometimes while they’re still trapped, working on whatever body parts are accessible.
The LA Times reported that a Drone Grounds Water Drops On California Wildfire–Again. An aircraft that cannot be communicated with, of course risks the lives of the pilots working above the fire;
As unmanned aerial system technology has become more prevalent, so have run-ins between civilians using it and government agencies that consider it a hindrance. The U.S. Forest Service issued a statement on civilian drone use last year, warning they could interfere with firefighters’ efforts in the air.
The morning of July 4th is also the start of the 2015 Tour de France on NBCSN. While the sport has been diminished due to the prevalence of doping/cheating in years past, the competition is still exciting, the scenery is still stunning and announcers Phil Liggett and Paul Sherwen are still funny. As a viewing tip we would recommend recording the live showing which is just Phil a Paul with very little of the studio guys.
For June 22nd, 2015 to June 26th, 2015
As for the sectors of the S&P 500, five outperformed the broad benchmark – Telecom, Discretionary, Healthcare, Financials, and Energy. The remaining five – Staples, Technology, Industrials, Materials, and Utilities – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 3.48% this week, with Telecom outperforming all, and Utilities coming in last.
For June 22nd, 2015 to June 26th, 2015
As measured by the S&P 500 sector indices, respective performances were: