AdvisorShares Weekly Market Review – Week Ending 9/1/2017
Highlights of the Prior Week
August Was Complicated But Markets Took It In Stride
August of course has plenty of historical precedence for being a challenging month for domestic equities but that wasn’t really the case this year. The Dow Jones Industrial Average was up 0.26%, the S&P 500 tacked on five basis points, the NASDAQ gained 1.27% but the Russell 2000 fell 1.41%. The past week however was sneaky strong, salvaging what was looking to be a down month with the Dow going up 0.79%, the S&P 500 rallying 1.36%, the NASDAQ jumped 2.69% and the Russell 2000 had a 2.60% gain.
Although maybe not shocking, the ECB doesn’t seem to have figured out what its next move will be related to QE; should it taper or stand pat? It started out a couple of years ago buying €60 billion per month, up to €80 billion and back down to €60 billion. These are huge numbers in relation to the amount of paper issued such that almost immediately after starting, it needed to expand beyond government paper for there not being enough supply. More than being stimulative, the ECB appears to have greatly distorted markets with the German bund yield down around 38 basis and relatively weak credits like Spain and Italy yielding less than the US. The euro rallied strongly for most of the week but sold off some on Friday as this news broke but still closed with a 1.19 handle.
The jobs report on Friday was a bit of a dud but a dud without much in the way of market consequence as the market further priced out the possibility of a rate hike this year (down to a 33% probability as of last week). There were 156,000 new jobs created and the headline unemployment rate ticked up to 4.4%. The broader U6 was flat at 8.6% as was the labor force participation rate at 62.9%. Wages continue to be a disappointment rising 0.1% for the month, 2.5% year over year. The previous two months were revised down by a combined 41,000. We would note that while expectations for another rate hike have diminished, the Q2 GDP was revised higher to 3.0% from 2.6% and while that does not change the nature of what has been a subpar recovery/expansion it is better than the alternative.
It should not be a surprise if the jobs numbers get revised in a significant fashion based on August often being revised sharply and we do not yet know whether Hurricane Harvey influenced these numbers and if so by how much. As a category 4, the death toll was just a fraction of category 5 Katrina which is not to minimize the loss of life but we would put it in the it could have been worse category. The initial estimates are that it will cost just under $200 billion to repair/replace and take years to do so but it would not be a surprise either if those estimates increased.
Gold had a good week amid the angst caused by the hurricane and lingering political dysfunction. However the action has been in the industrial metals this year. Barron’s reported a year to date rise of 24% for copper and a whopping 43% lift for palladium. Palladium is of course used in catalytic converters and copper is used in just about everything and while the headline inflation numbers have been more than tame it is worth paying attention to see whether the moves in industrial metals start to spillover elsewhere.
A Republican Party ETF? We’re not sure if it is a billion dollar idea or a zero dollar idea but it looks like the market will get the chance to decide:
Point Bridge Capital plans to launch the Point Bridge GOP Stock Tracker ETF (MAGA) next month to track companies with employees and political action committees highly supportive of Republican candidates.
While it might seem like the a bit from Jerry Seinfeld, did you ever wonder Why Don’t The Irish Speak Irish:
The Danes have Danish, the French speak French, the Slovakians talk in Slovak yet the Irish don’t speak Irish, but rather English. Almost all nations and people have their own language yet the Irish are one of the few nations who have a language that very few of its people can speak. Ireland is one of the only countries in Europe whose primary language is that of a foreign country. In fact, more people in Ireland speak Polish on a daily basis than Irish (and French is close behind).
Long time ESPN college football analyst Ed Cunningham left the booth because his conscience won’t let him “be in the cheerleader spot” any longer.
But Cunningham, 48, resigned from one of the top jobs in sports broadcasting because of his growing discomfort with the damage being inflicted on the players he was watching each week. The hits kept coming, right in front of him, until Cunningham said he could not, in good conscience, continue his supporting role in football’s multibillion-dollar apparatus.
Source: Google Finance, Yahoo Finance, Wall Street Journal, SeekingAlpha, Bloomberg, Ycharts.com, Reuters, Barrons, ETF.com, XTF.com, Bespoke Investment Group, CME Group, whistlinginthewind.org, NY Times