AdvisorShares Weekly Market Review – Week Ending 7/2/2015
Highlights of the Prior Week
Greece Votes No!
Markets provided quite a workout last week but there may not be a chance to take a knee and catch a breath depending what the reaction will be to the latest from Greece over the weekend, Puerto Rico, China, Thursday’s jobs report and all the rest.
If market participants were looking to the Greek referendum to finally resolve things, they will be disappointed as ‘no’ doesn’t actually mean what every thought it meant. It simply means that Greek citizens do not want their government to accept the latest demands of the IMF. This may actually be a less chaotic outcome of the vote as Greek Prime Minister Alexis Tsipras was calling for a no vote. A yes vote would have likely led immediately to new elections. So nothing has really changed with the Grexit threat.
Oh, about that jobs report; there were 223,000 new jobs which was close to the consensus estimate, the headline unemployment rate came in at 5.3% which is very close to theoretical full employment (we can talk about quality of those jobs another time). The broader U-6 unemployment rate came in at 10.5%. Drawing perhaps more attention was that wages were stagnant for the month and the Labor Force Participation Rate came in at 62.6% which is lowest reading since 1977.
Domestic equity markets drifted lower last week with the major averages flirting with their 200 day moving averages. The Dow Jones Industrial Average fell 1.25%, the S&P 500 dropped 1.21% while the NASDAQ gave up 1.44% and the Russell 2000 slid 2.49%. For the year to date numbers through June 30th the Dow fell 1.15%, the S&P 500 added 20 basis points not including dividends, the NASDAQ gained 5.32% and the Russell 2000 tacked on 4.19%.
All of the foreign markets we regularly follow in this report were down last week. The uncertainty over Greece did not help the European markets as the FTSE 100 fell 2.49%, the CAC 40 declined 5.11% and the German DAX gave up gave up 3.78%. The decline, or should we call it a crash, in Shanghai continued last week as that market fell 12% on the week and is now down 28% from its June 12th high. IPOs have been halted in China for the time being and the market was up in Monday’s session. Other Asian markets also fell; the Nikkei was down 80 basis points, the Hang Seng dropped 2.6% while the ASX 200 slid 0.14%.
The yield on the US Ten Year Treasury Note fell by eight basis points to 2.39% perhaps due to uncertainty over Greece and the weaker data points contained in the jobs report. The German bund yield last week was down to 0.79%, the French OAT yield had a more muted drop to 1.24%, the Swiss ten year now yields 11 basis points, Spain closed out at 2.21% and Italy sits at 2.24%.
Rounding up commodities; gold was down 1.1% while crude oil fell 3.4%. In currencies, the euro had an odd week. It rose dramatically last Monday and proceeded to decline the rest of the week yet still managed to eek out a small gain against the dollar. The British pound fell against the dollar while the greenback rose against the yen.
ETF News & Data
ETF.com reported that net inflows for ETFs in the first half of the year was a positive $110 billion bringing the total asset level to $2.1 trillion. There were net inflows into international equities (especially currency hedged) and domestic fixed income and outflows from domestic equities.
Fund flows for the week were schizophrenic as there were broad based domestic equity index funds on both the inflow and outflow lists. Additionally there were positive flows into three different health care sector funds and also negative flows from the high yield bond space.
There were 16 new funds launched last week including quite a few single country, currency hedged equity funds from iShares that target small markets like Switzerland and Mexico. Alps expanded its suite of sector funds with two new smart beta ETFs.
MentalFloss revisited a concept from the 1970’s called The Map With Only 38 States which was a proposal put forth by George Etzel Pearcy based on the following;
Pearcy’s proposed state lines were drawn in less-populated areas, isolating large cities and reducing their number within each state. He argued that if there were fewer cities vying for a state’s tax dollars, more money would be available for projects that would benefit all citizens.
ESPN reports that It’s Bobby Bonilla’s Payday as the retired All Star outfielder and World Series champion receives $1.2 million every July 1st as part of a deferred contract that will continue to pay him until 2035 when Bonilla will be 72. In an age where a large number of professional athletes go bankrupt shortly after retirement, Bonilla would seem to be set. For an investing angle, we would note the following excerpt;
The agreement called for deferred payments at an 8 percent annual interest rate. At the time, Mets ownership did not mind that interest rate because their investments with Bernie Madoff were returning comfortably more than that figure.
Congratulations to the US Women’s National Soccer Team on their surprisingly easy win over Japan. Carli Lloyd may have had a $10-$20 million hat trick in the early going, $10-$20 million in terms of endorsements she likely will earn from her performance.
For June 29th, 2015 to July 2nd, 2015
As for the sectors of the S&P 500, five outperformed the broad benchmark – Utilities, Staples, Discretionary, Financials, and Telecom. The remaining five – Technology, Healthcare, Industrials, Materials, and Energy – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 3.13% this week, with Utilities outperforming all, and Energy coming in last.
For June 29th, 2015 to July 2nd, 2015
As measured by the S&P 500 sector indices, respective performances were: