AdvisorShares Weekly Market Review – Week Ending 9/18/2015
Fed Day Resolves Nothing
The Federal Open Market Committee pulled the rug out from any hope of relieving market uncertainty by announcing no rate hike and sounding more dovish in its statement as it introduced a concern of global uncertainty to the list of what it monitors to determine its policy. Arguably there is always global uncertainty so taken to an absurd extreme does that mean it will never raise rates again?
The FOMC was faced with a damned if they do, damned if they don’t proposition. Earlier in the year the committee allowed the belief that September would be the time to hike to take hold then as employment continued to improve in terms of the headline U3 rate, inflation and growth began to sputter and the Fed Funds Futures market assessed the probability of a September hike at 30% which argues that the market had not priced in a hike as many believed. But the Fed faces a credibility question as the World Bank urged the FOMC not to hike and before that the IMF did the same, did the FOMC acquiesce to these organizations? The answer is probably no but it is a valid question.
Markets appeared to not take the news well. Domestic equity indexes trended higher for most of the week, spiking up on the Fed news at first before finishing flat for Thursday and then selling off more than 1.5% on Friday. For the week the Dow Jones Industrial Average fell 0.31%, the S&P 500 gave up 15 basis points, the NASDAQ gained 0.11% and the Russell 2000 added 50 basis points.
Foreign equity markets were mixed. The FTSE 100 dropped 22 basis points, the CAC 40 fell 0.53% and the DAX declined 2.05%. Asia was more mixed with the Nikkei falling 0.96%, Shanghai giving up 3.18% but the Hang Seng rallied 2.03% and Australia added 2.10% getting perhaps a little help from the 2.74% lift for gold priced in US dollars.
One bit of shocking news from Monday morning was of course the German auto manufacturer that admitted to cheating on emissions tests leading to a 20% share price decline in early trading.
West Texas Intermediate Crude gained 0.53% for the week but that includes a greater than 4% decline on Friday. Barron’s noted the divergence between crude which has declined this year and gasoline which has rallied. The magazine notes that while the average price at the pump is around $2.30 it is likely to fall toward $2.00 now that the summer is over and as the retail chains switch to the winter blend which is cheaper.
The FOMC announcement of course had ripples on the income markets. After closing the previous week at 2.18%, the US Ten Year Treasury Note traded up to 2.30% mid-week perhaps in anticipation of a rate hike and then rallied down to 2.13% on Friday. Foreign bond markets all marched to their own respective beats. The German bund yield added one basis point to 0.66%, the French OAT yield fell two basis points to 1.03%, the Swiss ten year gained four basis points to -0.03%, Spain’s yield drop 16 basis points to 1.94% and Italy fell seven basis points to 1.76%.
ETF News & Data
The SPDR S&P 500 had a $12 billion inflow last week and various small cap ETFs added another $2 billion. The outflow list had several sector funds, emerging market funds and a dividend ETF.
There were seven new funds launched last week including several levered industry funds from Direxion and an index fund from iShares that tracks Saudi Arabia. Like other funds that track Middle Eastern countries the Saudi fund is heaviest in financial stocks at 34% and has very little energy exposure; less than 2%.
While the world collectively spends less time at the library than it once did, there are still many that are stunningly beautiful buildings and Bored Panda offers 25 Of The Most Majestic Libraries In The World, the pictures are stunning, several of them are in the US and best of all it is not a clickbait article.
CBS News took a look at Going For Broke: When Athletes Lose It All which covered not just hard luck stories of retired athletes but also way younger athletes are being taught to handle their sudden wealth more responsibly in hopes of preventing future hard luck stories.
Former Pro Bowl linebacker Winfred Tubbs had a particularly insightful quote:
If we all made that money at the age of 30 instead of the age of 21, we wouldn’t probably be having this conversation.
Source: Google Finance, Yahoo Finance, Wall Street Journal, SeekingAlpha, Bloomberg, Reuters, Barrons, ETF.com, XTF.com, Bespoke Investment Group, CBS News, Bored Panda, Financial Post
Weekly ETF Flows
For September 14th, 2015 to September 18th, 2015
As for the sectors of the S&P 500, five outperformed the broad benchmark – Utilities, Staples, Healthcare, Discretionary, and Energy. The remaining five – Technology, Industrials, Financials, Telecom, and Materials – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 4.11% this week, with Utilities outperforming all, and Materials coming in last.
For September 14th, 2015 to September 18th, 2015
As measured by the S&P 500 sector indices, respective performances were: