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Posted by on Sep 16, 2014 in Market Insight

AdvisorShares Weekly Market Review – Week Ending 9/12/2014

AdvisorShares Weekly Market Review – Week Ending 9/12/2014

Highlights of the Prior Week

Macro

As opposed to risk on or risk off, last week was more like sell on. There wasn’t drama in the selling more like a slow erosion (that actually might be worse than a panicked sell off the could just snap right back). The Dow 30 fell 81 basis points, the S&P 500 dropped 105 basis points, the NASDAQ dipped 33 basis points while the Russell 2000 gave back 77 basis points.

The yield on US Ten Year Treasury Note rose 15 basis points to 2.63% after rising 13 basis points the week before. Retail sales came in a little stronger than expected which has added fuel to the expectation of rates rising sooner than expected. In fact many expect that after the FOMC get together this week the state will not include “considerable period” as in keep rates low for… Stronger than expected consumer confidence also contributed to this sentiment.

The ultimate importance of how the Fed unwinds the totality of its response to the financial crisis has been a huge point of contention for years. In that period of course many other central banks have taken similar steps to try to stimulate growth. The following from Barron’s succinctly captures the state of global zirp-ness;

The world may be a mess, but the world’s central bankers have the palliative in the form of endless free money. The effects are ticked off by Bank of America Merrill Lynch chief investment strategist Michael Hartnett and his colleague Brian Leung: 1.4 billion people around the globe are experiencing negative real (inflation-adjusted) interest rates; 81% of the global equity market capitalization is supported by zero-interest-rate monetary policies; and 45% of all government bonds yield less than 1%.

Currencies were mixed against the greenback. For the majors, Treesdale Partners reported that the Bank of Japan bought paper with a negative yield as part of its asset purchase program which hit the yen, the euro and pound each continued to sell off early in the week but were able to recover to close flat.

In commodities WTI crude oil dropped 1.22% while gold fell 2.45%. Both West Texas and Brent have been trending lower despite the escalated hostilities in the Middle East. This would argue for weak demand which and is a signal of reduced economic activity. Gold denominated in USD has been trending lower for the last two months.

For our weekly Euro deflation watch yields in Europe ticked up last week. The German Ten Year Bund yields 1.08%, the ten year OAT in France closed the week at 1.43%, Spain at 2.35% and Italy at 2.46% and yes the US still yields more than Spain and Italy.

Demand for the Alibaba IPO is apparently so strong that the pricing range is being raised at the high end from $66 to over $70. As a reminder the issue is due to price Wednesday night to start trading Thursday Sept 18th.

The vote on Scottish independence is due this Thursday as well. Polls have been back and forth on a likely outcome. If the independence vote wins, organizers still want Scotland to recognize the Monarchy and use the British pound through a currency Union. Great Britain is not so eager to have a currency union. Scottish organizers believe it will take 18 months to complete negotiations on a separation of the two countries but how separate will they actually be?

ETF News & Data

This past week’s creation and redemption tables were interesting as high yield bond index funds saw large outflows while aggregate index and treasury bond ETFs saw large inflows.

There were two new ETFs launched last week. Powershares issued a short term bond ladder ETF and StateStreet debuted an actively managed equity ETF that attempts to assess the current environment as either being “risk on” or “risk off” and allocates accordingly.

Interesting Reads

Vox wrote up what could best be described as expose on America’s love of pumpkin flavored food and drinks, including charts and graphs, with particular attention paid to the pumpkin spice latte available at Starbucks as well as plenty of other coffee houses around the country.

But the crown jewel of this pumpkin berserker rage is what’s known as the pumpkin spice latte, an unctuous, pungent, saccharine brown liquid, equal parts dairy and diabetes, served in paper cups and guzzled down by the liters.

Sports

Bloomberg had what must be the longest article ever written about foul balls and the extent to which fans get hurt by them, about 1750 per year. The article starts out with the following;

From his perch in the Atlanta Braves infield on May 20, third baseman Chris Johnson heard what sounded to him like the crack of two bats in quick succession. The first was a line drive off the bat of Milwaukee Brewers outfielder Carlos Gomez. The second was the ball smashing into the head of an 8-year-old in black shorts and a blue shirt, who was seated in the first row behind first base.

On another topic, what the hell is going on with the NFL and its shocking state of disarray? It is difficult to keep all the news accounts straight between Ray Rice, Greg Hardy, Adrian Peterson and Ray McDonald. One interesting, albeit small, aspect of the entire Ray Rice situation is that the Ravens are having a Jersey exchange at M&T Stadium September 19-20 where fans can get another jersey for free.

Roger Nusbaum, AdvisorShares ETF Strategist

Source: Google Finance, Yahoo Finance, Wall Street Journal, Bloomberg, Barrons, ETF.com, XTF.com, VOX, Baltimore Ravens

 
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Weekly ETF Flows

For September 8, 2014 to September 12, 2014

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Shares outstanding include totals as of current day NAV.

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S&P Sector Analysis

As for the sectors of the S&P 500, four outperformed the broad benchmark – Technology, Financials, Healthcare and Industrials. The remaining six – Staples, Discretionary, Materials, Telecom, Utilities and Energy – each 3.70% this week, with Technology outperforming all, and Energy coming in last.

For September 8, 2014 to September 12, 2014

Sector performances, as measured by the S&P 500 sector indices were:

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david@mediaworksllc.com

The AlphaBaskets blog provides frequent market insight and commentary by AdvisorShares Investments, LLC, created by AdvisorShares and other leading active managers.  AdvisorShares Investments is an SEC-registered investment adviser and the investment adviser to the AdvisorShares actively managed ETFs. The views expressed on AlphaBaskets should not be taken as investment advice or a recommendation for any of the actively managed ETFs advised by AdvisorShares.

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