Oil Stable While Stocks Retreat
By Laif Meidell, CMT, President of American Wealth Management, and Portfolio Manager of the AdvisorShares Meidell Tactical Advantage ETF (NYSE Arca: MATH) and the AdvisorShares Market Adaptive Unconstrained Income ETF (NASDAQ: MAUI)
Stocks traded higher during the morning as the price of oil continued to rise, but as time for the FOMC announcement drew near stocks drifted sideways as investors awaited the Fed’s decision on interest rates and any guidance of rate hikes going forward.
Though investors appeared to be in a speculative mood before the Fed announcement, that disposition quickly dissipated after the news release like water down a drain. Stocks gave back their early gains and more during the last two hours of trading with the Standard and Poor’s 500 dropping 1.09 percent and the Nasdaq Composite falling 2.18 percent on the day.
The one surprising market dynamic on Wednesday was the stability in the price of oil while stocks were in full retreat.
The Fed statement acknowledged the slowdown in growth and that it expected inflation to remain low in the near term. It also indicated it was “closely monitoring global economic and financial developments.” But, what appeared to bother investors the most was the lack of dovish comments, or hand holding, from the Fed, particularly given the shakeup in U.S and foreign stock markets since the last FOMC meeting in December.
With the price of oil closing above $30 per barrel for the last four days, investors appear to be catching their breath and a little less edgy, as the green shoots of price reversals in some areas of the stock market are starting to appear. This is particularly true in those areas of the market that were unloved and unappreciated in 2015.
In 2015, large growth-type companies were the only ones investors were willing to keep their money in the entire year, and the media began referring to them as the FANG stocks. However, after this past week’s shake out an entirely different picture is emerging as mid-cap value type stocks show greater relative strength over last year’s leaders with the Wilshire U.S. Mid-Cap Value index up 2.62 percent over the past five trading days versus the Wilshire U.S. Large-Cap Growth index up 0.09 percent over the same period.
The top countries this week are those rich in oil as the top performing countries led by Market Vectors Russia index up 12.14 percent over the past five trading days followed by the MSCI Norway IMI index gaining 7.75 percent over the same period.