AdvisorShares Weekly Market Review – Week Ending 9/9/2016
Highlights of the Prior Week
Wait, So September Is Back On The Table?
The general sentiment after the jobs report on September 2nd was no hike from the FOMC in September. Fast forward a couple of days and we heard Boston Fed President Eric Rosengren get a little more hawkish and while he was not specific about September the market reacted like he meant September.
The equity market did not take the Rosengren comments well, going down 2-3% depending on the index and breaking the more than 40 day streak with no move for the S&P 500 greater than 1%. The markets had been heading toward very modest gains for the week but Friday took them all into negative territory as the Dow Jones Industrial Average fell 2.18%, the S&P 500 dropped 2.37%, the NASDAQ slid 2.33% and the Russell 2000 gave up 2.58%.
If markets are concerned that the Fed will hike sooner than later then it would make sense for yields to rise and that is what happened as the yield on the US Ten Year Treasury Note jumped to 1.67%. Yields elsewhere also rallied. The German bund yield finished the week in positive territory by one basis point having been negative for months. The UK gilt jumped to 0.85%, the French OAT similarly jumped to 0.30%, the Swiss ten year closed at -0.42% and the JGB now charges one basis point.
Part of the equation for global rates going up so much last week maybe have been a concession of sorts from ECB President Mario Draghi that the asset purchase program may be running out of steam. Instead ramping up asset purchases Draghi said that now the individual country in the Union need to do their part with fiscal policy to stave off deflation and stimulate economic activity. During the financial crisis it was said that creating inflation is easy, except when you need it and that might be where the global economy is right now.
Against that backdrop, European equity markets fell but did less so than their US counterparts. The DAX fell 1.03%, the CAC 40 dropped 1.13% and the FTSE 100 was down 1.71%. Asian markets were mostly higher except for the ASX 200 which fell 0.46% perhaps due to a weaker than expected GDP report. The Nikkei 225 gained 0,25%, the Shanghai Composite added 0.36% while the Hang Seng was the big winner tacking on 3.64%.
The Korean peninsula has also been a nexus for many events lately including the bankruptcy of a major shipping company that has left some of the fleet unable to dock and offload cargo which has the potential to domino into impacting other companies. The smart phone battery issue (they catch fire if plugged in with the wrong type of cord) was serious enough that the FAA issued a warning about bringing them onto planes. North Korea staged its “biggest” nuclear test on Friday with a warhead that it claims can be mounted onto a ballistic missile. The benchmark KOSPI Index was looking positive for the week before the nuclear test but closed the week with a slight loss after falling 1.25% on Friday.
West Texas Intermediate Crude had a wild ride going up 4% on Thursday and giving it back on Friday to close the week 3.42% higher, just shy of $46. Gold spiked higher on Tuesday but reversed most of the gain which is a logical reaction as interest rates potentially going up would strengthen the dollar (which also happened on Friday) and reduce any inflation threat thus putting downward pressure on gold.
There were four new ETFs last week including a short duration fund from Goldman Sachs and a minimum volatility, small cap equity fund from iShares.
Music fans might be curious to learn How The Who’s Keith Moon Made The Worst Solo Album In History. From Team Rock;
In 1974 The Who’s Keith Moon released a solo album, Two Sides Of Keith Moon. It cost $200,000 to record but no amount of money could fix the real problem: it was an absolute mess.
Over the last couple of seasons, the NFL has drawn heat for what seems like an unnecessarily strict uniform policy. The latest chapter was that the league was going to fine players who chose to wear cleats that paid tribute to those who perished on September 11, 2001. At least one person at the league office has a heart, and common sense as the Daily News reported that NFL Players Will Not Face League Fine For Wearing Tribute Gear On Anniversary Of 9/11 Attacks;
Yahoo! Sports reported that players from Redskins tight end Chris Cooley to Titans quarterback Matt Hasselbeck, who had tweeted pictures of new Reebok gear honoring the national tragedy, were expecting to have to shell out a fine for wearing the special cleats and gloves in Sunday’s games. But NFL spokesman Greg Aiello told the Daily News on Friday afternoon that the players would not be fined for wearing the tribute gear, despite the league’s strict uniform policy.
Source: Google Finance, Yahoo Finance, Wall Street Journal, SeekingAlpha, Bloomberg, Reuters, Barrons, ETF.com, XTF.com, Bespoke Investment Group, CNN, The Telegraph, Team Rock, Daily News
For September 6th, 2016 to September 9th, 2016
As for the sectors of the S&P 500, four outperformed the broad benchmark – Energy, Healthcare, Financials, and Utilities. The remaining six – Telecom, Technology, Industrials, Discretionary, Materials, and Staples – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 2.36% for the week ending 9/9/16, with Energy outperforming all, and Staples coming in last.
For September 6th, 2016 to September 9th, 2016
As measured by the S&P 500 sector indices, respective performances were: