Highlights of the Prior Week
A Wild Ride To Nowhere
Wild ride to nowhere is the best way we can think of to describe 2015. Despite being essentially flat for the year it somehow feels worse than that.
Domestic equities for the week were down slightly but more importantly, of the four benchmark indexes we follow in this report only the NASDAQ Composite was positive for the year with a gain of 4.16% thanks largely to a handful of mega cap companies. The Dow Jones Industrial Average fell 3.50% while the S&P 500 fell 2.13% on a price basis which makes just about exactly flat on a total return basis. The Russell 2000 was the laggard with a 6.13% decline.
Markets endured a good old fashioned correction in the third quarter with the benchmarks declining roughly 7% by quarter's end but at their worst were down 11-12% from highs earlier in the summer. The FOMC waited until the middle of December before finally raising rates. Many feel that the best opportunity to raise rates may have been earlier in the year when GDP and employment were a little bit stronger. While anyone can armchair quarterback the bigger dilemma was that the Fed painted itself into a corner by setting targets for inflation and the headline unemployment rate many years ago in the expectation that stimulative interest rate policy would actually be stimulative. The economy reached 6% unemployment long ago without getting to 2% inflation and all the while GDP growth has muddled relative to past recoveries/expansions.
Currency volatility was a big story at the start of the year with the euro falling 9.5% against the dollar and the British pound declining 4.9%. The biggest currency story though was in January when the Swiss National Bank abandoned its attempt to peg to the euro sending the franc rocketing higher against just about all currencies and sending the Swiss ten year note into negative yield territory where it remains today at -0.06%.
The strength of the dollar made it difficult for investors to capitalize on general outperformance of foreign developed markets in 2015. The DAX gained 9.56% for the year, the CAC 40 rallied 8.53% but the FTSE 100 fell 4.93% perhaps attributable to heavier weightings in energy and materials. In Asia the Nikkei 225 jumped 9.06%, the Hang Seng was down 5.17% and Australia was down 2.58%. The Shanghai Composite finished the year with a 9.41% gain but the year end result doesn't capture the ride that market undertook. In the first half of the year the market rallied close to 60% and then fell 30% on the back nine under the weight of growth concerns, frothiness in the equity market itself and to a lesser extent an ever-worsening pollution problem in larger cities.
Crude oil of course had a terrible year dropping 30% in 2015 after cutting in half the year before. The Wall Street Journal's recap of the energy market focused on creative destruction from shale formations which the journal notes has altered the supply and demand dynamic.
Global yields generally moved higher other the Switzerland and Italy which fell 18 basis points to 1.59%. The US Ten Year Treasury Note nudged up nine basis points on the year to 2.26%, the German bund moved up 13 basis points to 0.63%, the French OAT gained 0.20% to 0.98% and Spain closed out the year at 1.77%.
The Wall Street Journal had a fun look at Why Switzerland Causes Price Shock--And What You Can Do About It. Between the $150 airport taxi rides and very high average rent it can be very expensive but pay is usually commensurate with those elevated expenses.
Last year, he bought a Mammut backpack in Stuttgart for €250 ($275) less than the cost of the same bag in Zurich-even though Mammut is a Swiss brand. "The strange thing is that even for Swiss products you pay less in Germany.
The start of the new year of course brings the current version of the Dakar Rally with coverage starting daily on January 4th for the next two week on NBCSN 90 minutes after the close of the stock market on most days. RedBull.com helps race fans out with 6 New Things To Spot At The Upcoming Dakar Rally;
Like the Olympic Games and Football World Cup, the El Niño weather phenomenon comes in cycles. As the Pacific Ocean warms, so the wind and rain ramp up. At the moment it's as strong as it has been for five years, and causing such havoc that the Peruvian authorities decided they couldn't host the Dakar Rally because all its emergency services are on high alert. The Dakar will now visit just two countries, Argentina and Bolivia. A return for Peru is expected in 2017.
And as a bonus, have you ever wondered how much the staff in college football programs make? ESPN reports that These Strength And Conditioning Coaches Carry Hefty Price Tags.
2. Mickey Marotti, Ohio State, $431,558
Counting bonuses in Ohio State's rise to the top of the college football world last season, Marotti pulled in a total of $524,750. Marotti helped Urban Meyer win two titles at Florida before re-joining the coach at Ohio State. When Meyer was hired at Ohio State in 2012, he called Marotti -- who now controls the Buckeyes' 13,000-square-foot weight room and holds the title of assistant athletic director for football sports performance -- his most important hire. Marotti doesn't do only the meathead stuff. He has also made himself responsible for synthesizing data on all the players that is shared with other parts of the Buckeyes' support staff.
Source: Google Finance, Yahoo Finance, Wall Street Journal, SeekingAlpha, Bloomberg, Reuters, Barrons, ETF.com, XTF.com, Bespoke Investment Group, redbull.com
Weekly ETF Flows
For December 28th, 2015 to December 31st, 2015
S&P Sector Analysis
As for the sectors of the S&P 500, six outperformed the broad benchmark - Discretionary, Utilities, Healthcare, Industrials, Staples, and Financials. The remaining four - Technology, Telecom, Materials, and Energy - each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 1.86% this week, with Discretionary outperforming all, and Energy coming in last.
For December 28th, 2015 to December 31st, 2015
As measured by the S&P 500 sector indices, respective performances were:
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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