Is the Long-Awaited Market Top Here?

04/16/2014 7:00 am EST

Focus: STOCKS

After Thursday's 2% decline in the S&P 500, the staff at staff at BespokeInvest.com took a look at how asset classes across the financial spectrum performed.

What a brutal stretch it has been for US equity investors. Growth name weakness has spilled over into the rest of the market for the time being, and US-focused ETFs are showing it, drastically underperforming peer indices in the rest of the developed world and the emerging markets alike. While returns haven't been spectacular recently anywhere outside of some emerging markets (EM), the persistent selling in US markets hasn't been replicated to the same degree, although Italy (EWI), Japan (EWJ) (NKY) (DXJ), and Russia (RSX) have been the laggards among international equity markets.

In non-equity asset classes, there's an entirely different feel. Currencies, commodities, and fixed-income focused funds are all thumping equity allocations. Precious metals are still down month-to-date, but continued volatility in US stocks is likely to reinforce the recent bid for these assets. Meanwhile the US yield curve has been bull steepening as the equity markets re-align, helped along by dovish comments littered throughout the Federal Reserve's release of its March Federal Open Market Committee minutes on Wednesday.

ETF/Sector Performance Table

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While EM names and non-US equities have been boosted by the roll-over in US markets, we're interested to see if a larger risk-off mentality spreads from American bourses to overseas markets, or if the US weakness is a more localized phenomenon. Bulls are not comfortable domestically; will that feeling spread abroad too?

Pain in the Most Heavily Shorted Stocks
Short interest figures for the end of March were released last week. Below we have provided a table of the most heavily shorted stocks (as a percentage of float) in the S&P 1500. The list includes every stock that has more than 25% of its free-floating shares sold short (in the middle of March there were only 25). For each stock we have also included its performance so far this month.

Highest Short Interest Stocks Table

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The month is only a little over ten days old, but already it is looking to be quite a good month for the short-sellers. Of the 33 names highlighted below, only 11 are up, while the remaining 22 are down. All in all, the average return of the stocks listed is a decline of 2.98%, which is 100 bps more than the 1.92% decline for the S&P 1500 (-1.92%).

By the Staff of BespokeInvest.com

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