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Posted by on Jul 18, 2014 in Laif Meidell

Airliner crash likely not significant factor on market

Airliner crash likely not significant factor on market

By Laif Meidell, CMT, president of American Wealth Management, and portfolio manager of the AdvisorShares Meidell Tactical Advantage ETF (MATH)

Just as the stock market appeared to be regaining a foothold following last week’s decline, it was hit with a new round of selling on Thursday.

News that Malaysian airline flight 17 had crashed in eastern Ukraine with 295 people on board sent shock waves throughout the financial world, as officials is Washington speculated the jet airliner was hit by a missile fired from the ground.

Although the organization responsible for this terrorist act has not been confirmed, Ukraine’s security service released wire taps pointing to potential rebel involvement.

Last month, Russian state media reported that the rebels in Donetsk had taken anti-aircraft missile systems, including a Buk, which is believed to have been used in the attack on the Malaysian airliner.

Although it was a difficult day for the stock market, and for those friends and families who lost loved ones in the crash, the day’s events don’t appear to be the kind that will escalate much in the days ahead.

Following the airliner’s demise, the Standard & Poor’s 500 declined 1.18 percent on Thursday.

In contrast, the worst performing bonds on Thursday were convertible bonds, with the Barclays U.S. Convertible Bonds index falling 1.17 percent throughout the trading day. This is a reminder that not all bonds provide the uncorrelated diversification away from the stock market, that many investors are looking for when adding bonds to their portfolios.

The best-performing areas of the bond market on Thursday included high-quality, longer-maturity bonds with the Barclays U.S. 20+ Year Treasury index higher by 1.26 percent on the day.

This also was the top-performing bond index over the past week with the Barclays U.S. 20+ Year Treasury index up 1.79 percent over the past five trading days.

Interestingly, although both are being affected by different forces, long-term treasury bonds and the S&P 500 are up roughly the same amount over the past three months with the Barclays U.S. 20+ Year Treasury index rising 4.13 percent and the S&P 500 up 4.18.

This commentary originally published in the Reno Gazette-Journal. Performance numbers used in this article were obtained through eSignal and are not guaranteed to be accurate.

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.