AdvisorShares Weekly Market Review – Week Ending 8/7/2015
Highlights of the Prior Week
Investors Don’t Want Their MTV
Nonfarm payrolls added 215,000 while the headline unemployment rate remained at 5.3%. The labor force participation rate reported at a still uninspiring 62.6% but more encouragingly the broad U6 unemployment rate fell to 10.4% which is its lowest reading since 2008. The jobs added was in line with expectations and not viewed as reason alone for the Fed to alter its stated intention to raise rates this year.
The media group endured a rough week, a Schumpeterian decline perhaps as questions about the future of the advertising model that has been in place for decades has come under scrutiny as well as the bundling concept as more people seek content online. There were double digit declines on the week for both content providers as well as distributors but these are large cap companies and in a couple of cases mega cap companies which is unusual trading for these names.
The overall domestic equity market was also down last week. The Dow Jones Industrial Average, weighed down by one of those media stocks, fell 1.78%, the S&P 500 was down 1.23%, the NASDAQ dropped 1.62% while the Russell 2000 brought up the rear giving back 2.56%. The S&P 500 spent most of Friday under its 200 day moving average but managed to recover and close above that trend line.
Foreign equity markets were mostly higher last week. In Europe the DAX gained 1.61%, the CAC 40 added 1.44% while FTSE 100 was up by 33 basis points. In Asia the Nikkei 225 was better by 0.68%, the Hang Seng was down 0.35% and the Shanghai Composite tacked on 2.19%. The Wall Street Journal noted that Chinese officials have spent $1.3 trillion, an amount equivalent to 10% of GDP, propping up their stock market. For some perspective that is greater than the $700 billion the US spent on TARP to salvage an economy that is 70% larger than China’s.
We would also note that the ASX 200 fell 3.7% on the week which includes a 2.41% drop on Friday which the WSJ reports is the largest one day drop for that market since May, 2012 which is an interesting comment on that market’s volatility or lack thereof.
Yields had a curious week. In the US the Ten Year Treasury Note fell three basis points to 2.17%. Germany was flat, continuing to yield 0.66% as was Switzerland at -0.01%. Yields elsewhere moved higher; France to 0.97%, Spain to 1.99% and Italy to 1.83%.
The misery in the crude oil market continued last week with West Texas Intermediate Crude falling more than 6% to close at $44.31. Gold priced in US dollars had a bumpy ride to a fairly flat 0.23% decline.
ETF News & Data
Last week was quite on the ETF front. There were no new funds launched and there was little to glean from fund flows. For example there was one fund tracking the S&P 500 near the top of the leader board for creations while another fund tracking that index was at the top of the list for redemptions. There were also redemptions in the high yield bond sector, gold and biotechnology.
The Washington Post reports that As California Fires Rage, The Forest Service Sounds The Alarm About Sharply Rising Wildfire Costs.
The report comes amid a quickly worsening 2015 wildfire season. While the number of total national fires is actually below average for this time of year at 36,959, the acreage burned is well above average already, at close to six million acres. Nearly five million of those acres have burned in Alaska, which has had the most dramatic wildfire season of any state this year. But lately, activity has picked up alarmingly in the state of California as well, and indeed, recently claimed the life of South Dakota firefighter David Ruhl, who perished combating a northern California blaze.
If Dos Equis ever needs a new Most Interesting Man In The World, it might start by talking to Kenny Habul. Born in Australia, residing in North Carolina, during the week Habul is the CEO of Sun Energy 1 which as the name implies does solar installations for businesses. On the weekend Habul drives the number 20 car in the NASCAR XFinity series for Joe Gibbs Racing. We could probably all stand to make better use of our downtime.
For August 3rd, 2015 to August 7th, 2015
As for the sectors of the S&P 500, five outperformed the broad benchmark – Utilities, Financials, Staples, Industrials, and Technology. The remaining five – Telecom, Materials, Healthcare, Discretionary, and Energy – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 4.46% this week, with Utilities outperforming all, and Energy coming in last.
For August 3rd, 2015 to August 7th, 2015
As measured by the S&P 500 sector indices, respective performances were: