Auguary ain't easy

In many ways, last Friday’s disappointing Jobs report was like a trip to an art museum in that there was something for everyone and no two people could arrive at the same opinion on what any of it meant.  According to some investors, equities managed a stunning comeback after opening deeply in the red as the decision on the Fed’s rate hike schedule was seemingly made for it while others believed it was simply an oversold rally after the S&P 500 bounced off long-term support below 1880.  And the possibility of hugging the zero bound for the indefinite future sent investors scrambling into long-term Treasuries and beaten down equity sectors with income producing potential like the MLP’s and yet high yield funds like the SPDR Barclays High Yield Bond ETF (JNK) couldn’t overcome the weak open on Friday and still closed in the red.  Rather than rehash every move of the day, we turn back to the ETFG Behavioral Reports to find out who had the best week ever and what it could mean for the markets going forward.

Friday’s surge helped put almost every asset class and equity sector in the green on Friday with the exception of bank stocks which were held back as the possibility of the Fed hiking rates becomes less certain and while that helped breathe new life into energy stocks, the biggest winners of the day were the gold miners with the Market Vectors Gold Miners ETF (GDX) surging over 8% and helping put the fund decisively back above its 50 day moving average.  The miners have been a regular topic here lately; in late July, we discussed how they were among our worst ranked sectors and while the August rally was short-lived, the base formed by GDX over the last few months has been one of the longest-lived since Ben Bernanke first announced the tapering of QE3.  Friday’s employment report may have investors wondering whether real rates will go negative and help boost the miners even more and while that might not have helped the fund enough to appear on our list of top behavioral movers for the week, GDX has come a long way since last July when it ranked near the bottom of our lists.  Re-ranking the ETFG Quant Report based on just the Behavioral Score shows GDX at #164 with a score of 57.4, just a little more than 3 points shy of making the top 100!

The miners weren’t the only ones to benefit from investor expectations of a permanently dovish Fed as those emerging market funds which also were at the bottom of the behavioral heap last July experienced a surge all their own.  It’s hard to miss the shifting of the wind with three emerging market funds making our list of funds experiencing the weekly biggest behavioral score change but more surprising was finding two funds on our list of the top 25 Behavioral Funds with the iShares MSCI Emerging Index Fund (EEM) at #7 and most surprising of all, the iShares MSCI Brazil Index Fund (EWZ) climbing the list all the way to #6!  If you’ve read any of the major financial publications, at some point in the last year you’ve read an article about the massive capital outflows affecting the emerging market nation’s and no more so than former investor favorite Brazil, which remains stuck in the worst of all possible worlds with lower growth, high inflation and a political scandal that makes the Republican debates look like C-SPAN.  Every dog has its day and with the Wisdom Tree Dreyfus Brazilian Real Fund (BZF) down 46% since its peak in July 2011 through Friday and EWZ down almost 64% in the same period, some investors are wagering the increasingly weak economic outlook here at home means the capital outflows might soon stop or even begin reversing themselves although the shifting fortunes aren’t about just the Real.  Even the Deutsche X-trackers MSCI Brazil Hedged Equity ETF (DBBR) experienced a strong 3.48% gain on Friday and a 2.22% gain for the week overall.

Days where nearly every sector comes up a winner are rare indeed and with U.S. equities no longer in danger of crossing into oversold levels, the real questions on investor minds is whether the Fed might really hold off on tightening and whether that’s enough to spark a sustainable rally.  Investors won’t have to wait long as both questions are likely to be answered this week with three different Fed Presidents; John Williams, Narayana Kocherlakota and Charles Evans due to speak at different events on Tuesday, Thursday and Friday respectively and while the economic calendar is fairly light with data releases it’s loaded with Treasury auctions that will test investor appetite for “risk-free” securities.  Now all we have to hope for is that the Fed doesn’t offer three different opinions on interest rates this week.

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