For the week of October 28 - November 1
A Mixed Bag
As the government caught up on delayed economic reports due to the shutdown, the markets delivered mixed results across asset classes and geographies for the week. The Federal Open Market Committee (FOMC) meeting announcement last week did not change monetary policy. For the month of October, Domestic Equity markets continued their trend for the year with robust gains driven by a strong Q3 earnings season.
Most equity markets are up double digits year to date, outside emerging markets, with domestic markets being the strongest performer for the year. TrimTabs Investment Research and Portfolio Manager of AdvisorShares TrimTabs Float Shrink ETF (NYSE Arca: TTFS) reported that investors pour $54.2 billion into equity based mutual fund and ETFs for the month of October, the third highest inflow on record. Bond mutual funds and ETFs posted their fifth consecutive month of outflows. TrimTabs' research suggests that the equity markets are due for a pause from their upward trajectory.
So, where does that leave us? Since we don't have a crystal ball on market direction or magnitude, our best advice is to stay disciplined in your process. If you think the markets are frothy, you can take a portion of gains off the table or add a hedge to your long equity exposure.
Stock Markets Commentary and Asset Flows
The domestic equity market as measured by the S&P 500 was flat 0.13% for the week. International markets as measured by the MSCI EAFE underperformed domestic markets for the week, returning -1.47% with Emerging Markets reversing its trend from the prior week with 0.08%.
Six of the top ten ETFs that garnered the largest asset flows came from domestic markets with the iShares Core S&P 500 ETF (IVV) taking the lions share with almost $2B in new assets. REITs as represented by VNQ, was also in the top ten this week bringing in almost $200M in new assets. The biggest redemptions came in IWN, the Russell 2000 ETF, with almost $2B in outflows. Additionally, certain sectors (Technology, Financial, and Utilities) also fell out of favor.
Bond Markets Commentary and Asset flows
The U.S. Aggregate Bond Index reversed direction and wiped out the prior week's gains with a -0.37% loss on the week, and the High Yield sector was up slightly this week with returns of 0.26%.
The only representation of fixed income among the top creation units last week were in the MBS sector of the bond market as represented by MBB. Equities continue to rule the day!
Source: AdvisorShares
Past performance is not indicative of future results.
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