AdvisorShares Weekly Market Review – Week Ending 9/30/2016
Highlights of the Prior Week
What The FARC?
By now you know that a peace deal that would have ended decades of civil war in Colombia failed a general election after polls indicating the measure would pass easily. We mention it for two reasons, there are a couple of ETFs that track Colombia as well as several ADRs and because this is at least the second very surprising election result in the last few months.
Domestic equity markets closed the third quarter with a bumpy ride to a very flat week with no index moving more than 27 basis points in either direction. The quarter was strong with the numbers evidencing a net risk on environment. The Dow added 2.10% while the S&P 500 gained 3.31% which are good results but pale compared to the NASDAQ which rallied 9.68% and the Russell 2000 which advanced 8.66%. Markets were helped by technology primarily and industrials to a lesser extent. Leadership from these types of cyclical sectors have historically been good omens for future gains.
The year to date numbers are also solid with the Dow up 5.05%, the S&P 500 up 6.07%, the NASDAQ has gained 6.05% and the Russell 2000 has jumped 10.15% (all on a price basis). Small cap outperformance along these lines has also historically been a good omen for future gains.
The foreign equity markets we track for this report have been mixed year to date with a bias to the downside. The Shanghai Composite is down 15% in 2016, the Nikkei 225 has fallen 13.58%, while the Hang Seng has gained 6.41% and the KOSPI is up 4.2%. In Europe the DAX has declined 2.16% and the CAC 40 giving up 3.99%. It may come as a surprise that despite all that has gone on in the UK, the FTSE 100 is up 10.53% for the year (more than 6% in the third quarter despite Brexit uncertainty).
Global bond yields drifted lower without the same drama as seen the week before on the heels of the BOJ and FOMC news. The Ten Year US Treasury Note closed at 1.60%, the German bund dropped to -0.12, the UK gilt now pays 0.74%, the French OAT is down to 18 basis points, Switzerland has fallen to -0.54% and the JGB charges eight basis points.
There was interesting news from the energy patch as OPEC members agreed to curb production, cutting daily output by 750,000 barrels per day after what seemed like weeks of will they or won’t they. Skeptics may now focus on will they or won’t they in terms of sticking to the production cuts. West Texas Intermediate Crude rocketed higher by 7% on the week to take back the $48 level. Gold was down slightly as the US dollar was generally flat.
With one month to go before the Presidential election we are mercifully close to this political cycle ending. Up until last week’s debate the markets seemed to be ignoring the entire sordid affair until Tuesday when there was a huge drop in the US dollar against the Mexican peso which was widely interpreted as a win for Clinton given Trump’s comments regarding immigration. For the week USDMXN was down 2.21%.
Markets were taken on a ride with the headlines related to the German banking sector and Deutsche Bank which of course has well over a dozen exchange traded notes listed on US markets. Ron Rowland from Invest With An Edge thinks investors should Dump Deutsche Bank ETNs Now;
Your best recourse at this time is to sell your DB ETNs before such a risk materializes. On August 31, DB was the issuer behind 28 ETN listings on U.S. markets. DB “called” eight of them for redemption, with their last day of trading occurring on September 19. Additionally, the NYSE forced the delisting of the DB Base Metals Long ETN (BDG) after the market closed on September 16 because it had less than $400,000 of assets. Unfortunately, DB has not announced any plans or intentions of redeeming the BDG notes and returning the money to the noteholders. Instead, owners will have to find a buyer in the unlisted over-the-counter market for ETNs. Good luck with that.
Rolling Stone reports on ‘Killer Clowns’: Inside the Terrifying Hoax Sweeping America:
The clowns crept up into North Carolina, littering the state with the grim face paint and costumes. A machete-wielding clown tried to lure a woman into a wooded area in Forsyth County. Winston-Salem increased police presence in certain areas after two children claimed they were offered candy by a clown if they’d follow it into the woods. In both Henrico and Augusta counties, parents and their children reported clowns “leering” at them from cars or on the edge of a forest.
From Time Magazine:
Flash back to 1963, when Bill “Wink” Winkenbach (part owner of the Raiders), Bill Tunnell (Raiders’ publicist) and Scotty Stirling (sports reporter for the Oakland Tribune) founded the GOPPPL, also known by its longer moniker: Greater Oakland Professional Pigskin Prognosticators League. Fantasy baseball had long been a hobby of Wink’s when Tribune sports editor George Ross suggested trying the same method with football. When Wink brought the idea to Tunnell and Stirling, who were immediately on board and helped create the rules.
As for the sectors of the S&P 500, five outperformed the broad benchmark – Energy, Industrials, Materials, Technology, and Discretionary. The remaining six – Staples, Financials, Telecom, Healthcare, Real Estate, and Utilities – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 8.40% for the week ending 9/30/16, with Energy outperforming all, and Utilities coming in last.
For September 26th, 2016 to September 30th, 2016
As measured by the S&P 500 sector indices, respective performances were: