AdvisorShares Weekly Market Review – Week Ending 9/25/2015
September 25th was a truly fascinating day capping off a remarkable week. On the political front Speaker of the House John Boehner announced he will be resigning not just his position as speaker but also from Congress. Apparently he’s had it with the dysfunction which of course is threatening to ramp up again with a possible shutdown looming for October 1st. While we won’t offer commentary on the ideology that is dividing Congress it is clear that the spirit of cooperation that used to exist to get things done has deteriorated.
Biotechnology stocks have been under the microscope (yes, that was a pun) first for years of outperformance and lately weeks of underperformance. The latest attention came from Candidate Clinton who Tweeted of price gouging after the Daraprim story broke (the $7.50 pill whose price was temporarily jacked up 5000%) and then offered a plan to cap the costs of prescription drugs. If this was not good for the drug companies broadly, the sector down by 5% on the week, then it was very bad for biotech with the larger biotech ETFs dropping close to 15% on the week.
The biotech selloff magnified a fascinating divergence for much of Friday’s equity session where the Dow was up 1.6%, the S&P was up 125 basis points and the NASDAQ, which allocates roughly 10% to biotech was up 70 basis points. As the day wore on markets sold off, the S&P was down slightly, the NASDAQ was down 1% but the DOW, getting a tailwind from James Harden’s previous shoe sponsor, held on to a 70 basis point lift. Adding to the divergence was a 1.28% drop for the Russell 2000 for the day.
Before the open on Friday, second quarter GDP was revised up to 3.9%, this just a few days after the FOMC decided not to raise rates. Perhaps confusing the matter further, Fed Chair Janet Yellen gave a speech Thursday night in which she set the expectation that hike will happen later this year….unless of course it doesn’t?
For the week domestic equities were lower;
Dow Jones Industrial Average -0.43%
S&P 500 -1,35%
Russell 2000 -3.47%
Foreign markets were all over the map last week. European markets were generally lower despite large rallies in the larger markets. The big story out of Europe was of course the so called Diesel Debacle whereby one of the larger German auto manufacturers admitted to rigging emissions tests causing a 33% drop in the stock over the course of several days and a 3.9% drop for the DAX on Tuesday. People often use the term Black Swan incorrectly, the diesel debacle is an example of an event that is not reasonably predicted by anyone. Look for lawsuits, recalls and closer examination of other car companies coming soon.
The bond market wasn’t quite so exciting although the US Ten Year Treasury Note yield did move up four basis points to close the week at 2.16% after Chair Yellen’s comments. The German bund gave back last week’s one basis point increase closing at 0.65%, the French OAT also only moved one basis point to 1.04%, the Swiss ten year was big mover dropping to -0.07% as was Spain which added 11 basis points to yield 2.03% and Italy closed the week at 1.79%.
Gold rallied 0.75% for the week and West Texas Intermediate Crude had a wild ride (what’s new?) to a gain of 15 basis points.
Oh yeah, the Pope was in town too.
ETF News & Data
There were seven new ETFs launched last week include four funds from ProShares that invest the S&P 500 less one sector (S&P 500 ex-energy as one example) and an actively managed utilities sector fund.
Last week we noted a $12 billion inflow into the SPDR S&P 500 which was followed up with a $6 billion outflow most of which occurred last Monday. Various equity niches populated both the outflow and inflow leaderboards perhaps reflecting the heightened uncertainty since the equity markets started rolling over during the summer.
Is there someone in your life who spends a lot of their time playing video games? It turns out playing video games can be quite lucrative. Pacific Standard reports on The Business Of Playing Video Games;
Only a small handful of gamers make any real money from speedrunning. Even fewer make enough to actually support themselves. But as gaming culture has grown, so has speedrunning’s popularity. Burke’s success is controversial as a result. While many gamers embrace the idea of profiting from a hobby they love, others worry speedrunning’s creeping professionalization is ruining the gaming-for-gaming’s-sake purity of a once-niche passion.
The Diesel Debacle did not interrupt the Rennsport Reunion at the Laguna Seca Raceway in California over the weekend. MotorSport provided coverage and photos;
This unique class reunion is the largest gathering in the world for legendary Porsche race drivers and historic Porsche race cars. This year marks the fifth time that Porsche enthusiasts and collectors have travelled from all over the world to the demanding circuit in the dunes of Monterey.
Source: Google Finance, Yahoo Finance, Wall Street Journal, SeekingAlpha, Bloomberg, Reuters, Barrons, ETF.com, XTF.com, Bespoke Investment Group, MotorSport, Pacific Standard
Weekly ETF Flows
For September 21st, 2015 to September 25th, 2015
As for the sectors of the S&P 500, seven outperformed the broad benchmark – Utilities, Staples, Financials, Technology, Telecom, Discretionary, and Energy. The remaining three – Industrials, Materials, and Healthcare – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 7.02% this week, with Utilities outperforming all, and Healthcare coming in last.
For September 21st, 2015 to September 25th, 2015
As measured by the S&P 500 sector indices, respective performances were: