AdvisorShares Weekly Market Review – Week Ending 8/29/2014
Highlights of the Prior Week
The action in the S&P 500 last week lent itself to all manner of Prince jokes related to his hit song from 1982 which of course was called 1999 as the S&P 500 took that level, then 2000 and closed the week at 2003.
Although equities continued to melt up this week with the Dow 30 up 0.57%, the S&P 500 up 0.75% to a record high and the NASDAQ up 0.91% several of the trends observed here over the last few weeks broke in the last few days of the month.
For one, the Russell 2000 was up 1.20% last week. For some perspective, that small cap benchmark is up 1.08% year to date compared to an 8.38% lift for the S&P 500 on a price basis. That type of lag typically occurs late in the stock market cycle. And despite the modest rise in equities, volatility as measured by the CBOE Volatility Index (VIX) edged up to 11.98 from last week’s 11.47.
Interest rates headed lower with the US Ten Year Treasury closing the week at 2.33%. Yields in Europe continue to remain shockingly low. Ten year sovereign debt in Germany, Spain and Italy are trading at 0.89%, 2.23% and 2.44% respectively. How low are yields? German two year paper has a negative yield. The Wall Street Journal reports that Belgium, Finland and Austria also have negative yields. This is obviously quacks like a deflationary duck but we may be a long way from knowing that outcome.
This week the August non-farm payrolls report is due on Friday with job growth estimated to come in at 220,000 versus 209,000 last month and the headline unemployment rate is expected to downtick to 6.1%.
Over the weekend the Journal also made mention of how many strategists are expecting some sort of large correction in equity prices this fall, it has been three years since there was a 10% decline. These predictions will be correct unless they are not correct which is to say there is no way to predict what the market will do, only guess and so of course some percentage of the guesses will turn out to be correct. Managing portfolios based on guesses about the market’s direction is a weak second to a disciplined strategy for being fully invested with occasional defensive action which, repeated for emphasis, is based on a disciplined process.
ETF News & Data
The big news in the ETF world this week was the debut of a new provider in the space; WBI Investments. The firm launched ten actively managed ETFs. This appears to be another instance where a new entrant effectively pre sold their lineup because after two days of trading the entire suite had a combined $1 billion in assets under management.
In an article that might be very difficult to wrap your head around, NPR asks Has Next Tuesday Already Happened? It’s a bit of a mind-bender that tries to equate the linear nature of both time (which we probably understand a little) and space (which is a little tougher to digest).
Here’s a sample;
Of Albert Einstein’s many great achievements, his most profound might be the recognition that space (the location of Amsterdam Central Station) and time (the location of next Tuesday) cannot be so easily separated. And that is why next Tuesday may already exist in the same way as Amsterdam’s Central Station does.
As a bonus interesting read is this photo essay of 46 Incredible Photos. Most of them are incredible and they are all on one web page (so no click bait).
If you watched ridiculous amounts of college football over the weekend you no doubt saw more new uniform and helmet combinations that you can possibly remember. Lost Letterman provides this handy guide to help you keep track. As a bonus here is a piece from ESPN which tracks the evolution of number 1 ranked Florida State Seminoles’ helmets over the last 60 years.
Roger Nusbaum, AdvisorShares ETF Strategist
Source: Google Finance, Yahoo Finance, Wall Street Journal, Bloomberg, Barrons, ETF.com, XTF.com, ESPN, lostletterman.com, NPR
Weekly ETF Flows
For August 25, 2014 to August 29, 2014
Shares outstanding include totals as of current day NAV.
S&P Sector Analysis
As for the sectors of the S&P 500, five outperformed the broad benchmark – Utilities, Telecom, Energy, Healthcare and Financials. The remaining five – Materials, Staples, Discretionary, Technology and Industrials – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 2.21% this week, with Utilities outperforming all, and Industrials coming in last.
For August 25, 2014 to August 29, 2014
Sector performances, as measured by the S&P 500 sector indices were: