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AdvisorShares Weekly Market Review – Week Ending 1/19/2018

Highlights of the Prior Week

Shutdown! Go Ahead And Give It To Me!

Macro

The title of this week’s post is a nod to the late, great Tom Petty and the revelations surrounding his passing make us wonder if similar factors have contributed to congress’ increasing dysfunction as it failed to work effectively to stave off a shutdown. Barron’s had several data points and tidbits as to how inconsequential past shutdowns have been on economic activity and that in years where shutdowns have occurred, the average return for equities has been in the mid-teens. While we won’t be dumb enough to proclaim that this time shall be different, it makes us a little uneasy to see so many people on the same side of the boat.

The threat of a government shutdown did not derail stocks. While there is certainly an element of uncertainty that goes with a shutdown this is something markets have been through before, they are not permanent of course and as noted, have amounted to a speedbump in the past. For the shortened week, the Dow Jones Industrial Average and NASDAQ each gained the same 1.05%, the S&P 500 was up 0.88% and the Russell 2000 tacked on 34 basis points.

The move higher in interest rates continued last week at both ends of the curve with the Two Year US Treasury Note at 2.04% and the Ten Year US Treasury Note at 2.63%. We had a little bit of fun in last week’s update about whether or not a bear market in bonds has begun as per Bill Gross’ comments and while we don’t know the answer Bespoke Investment Group had a report showing that in the last ten years, any instance of rising rates was accompanied by rising stock prices. While that is better than the alternative, much of that ten year window came in a time of easing or steady Fed policy. The FOMC has been raising rates and we would not want to forget the old adage of not fighting the Fed. Slightly bigger picture, there is no precedent for coming off the zero bound.

Bitcoin had a 48 hour bear market last week, bottoming on Wednesday just under $9500 before rallying back to close Friday in the mid-11000’s (no point in giving exact number as they are stale right away and Bitcoin is quoted around the clock every day). The decline brought out plenty of media skeptics saying this was the big one but as we Tweeted on Wednesday morning, it didn’t feel like a panic, it felt more like a curiosity. That was not an attempt to predict what the price would do next, more like noting that whatever that decline was about, at $9500 there was nothing significant about it. The incredibly short term nature of the large decline and big snap back is similar to the “crash” in US equities on August 24th, 2015 when the Dow opened down 1000 points. That correction resolved in very short order as well. These serve as a microcosm for the more serious declines that clients have possibly forgotten can occur. The arc is identical; the market goes down a lot and confuses/scares investors, then it stops going down for no discernable reason and then it goes back up. The only difference is how long that all takes.

ETF News

Last Wednesday, two blockchain-themed ETFs launched without the word blockchain in the names of the funds as we noted last week. There was also some color provided from the SEC about what it will take to get a Bitcoin fund launched and the burden appears to be high as concerns focus on relative price stability, price discovery, liquidity and a few other things. There are of course ways to buy cryptocurrencies through channels not regulated by the SEC and putting ETPs on the back burner would appear to have the effect of pushing wouldbe speculators to these unregulated and potentially less safe (for the consumer) companies. This would seem to be contrary to the SEC’s mission.

Interesting Reads

The do’s and don’ts of buying a vintage trailer:

Buying a vintage trailer and being a part of the vintage trailering hobby should be a very positive experience. The first trailer you buy, may not be your “forever” trailer. Being in the hobby, and participating in the rallies yourself, will expose you to many opportunities to find your perfect trailer. Selling the trailer that you have shouldn’t be a problem with all the interest in the vintage trailering hobby and another newbie on the hunt for their first vintage trailer.

Sports

If you collected baseball cards as a kid, or an adult, then you might get a kick out of the Summer of ‘74 blog post about a Goodwill Store find. The blog’s design is great too.

If you happen to follow me on twitter, you know that I’ve made some waaaay cool finds at my local Goodwill lately. A while back, I posted on some premium 1990s sets I found at the same location. That find surprising to me, as I had only found cards at that store a few times in the past and almost never found anything worth picking up. But, as the next few posts will show…

Source: Google Finance, Yahoo Finance, Wall Street Journal, SeekingAlpha, Bloomberg, Ycharts.com, Reuters, Barrons, ETF.com, XTF.com, Zerohedge, Bespoke Investment Group, CME Group, vintagecampertrailers.com

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: To the extent that this content includes references to securities, those references do not constitute an offer or solicitation to buy, sell or hold such security. AdvisorShares is a sponsor of actively managed exchange-traded funds (ETFs) and holds positions in all of its ETFs. This document should not be considered investment advice and the information contain within should not be relied upon in assessing whether or not to invest in any products mentioned. Investment in securities carries a high degree of risk which may result in investors losing all of their invested capital. Please keep in mind that a company’s past financial performance, including the performance of its share price, does notguarantee future results. To learn more about the risks with actively managed ETFs visit our website http://AdvisorShares.com .
AdvisorShares is an SEC registered RIA, which advises to actively managed exchange traded funds (Active ETFs). The article has been written by Roger Nusbaum, AdvisorShares ETF Strategist. We are not receiving compensation for this article, and have no business relationship with any companwhose stock is mentioned in this article.