Volatility has been the word of the month, and though last week saw much of it, the market ended overall much further to the downside. 

    For the week, only 5 of 26 categories ended up, with only short and convertible funds ending the week up more than 1%.  Of the 21 categories that were down, 17 were down more than 1%, 15 were down more than 2%, 9 were down more than 3%, and 4 were down more than 5%. 

    For the month now, only short funds are up, with the remaining funds down on average 8.5%. 

    As far as the week's correlations go, other than short funds, only commodity, municipal, and infrastructure funds had S&P correlations below 50%.

    Dollar-Weighted Category Return

    This week brought further downside and volatility to the market, with only 8 of 26 categories positive and an average week category return of -1%. 

    Of those 8 categories that ended the week up, only utilities, Europe, commodities, and short funds were up over 1%. 

    Of the 18 categories that ended the week down, 15 were down over -1%, 8 were down over -2%, and 3 were down over -3%.  The worst performers were infrastructure, transports, energy, and China.

    At this point, only the currency, commodity, and short categories are currently up over the past trading month. 

    Year-to-date, large- and mid-cap categories have only marginally positive adjusted close returns, with small-caps already sliding beneath par. 

Dollar-Weighted Category Return

    On the week, 21 of 26 categories ended up.  Of these 21 categories, 17 ended up at least 1%, with the largest gains seen in Russia, Latin America, and China.  Of those 5 categories that were in the red, only 2 were down more than 0.3% - short funds, on the wrong end of the market this week, and real estate funds, still plagued by the on-going subprime and rate worries.

    It's interesting as well to note that the categories with the highest correlation to the S&P after retail were Russia and MSCI.  Those with the lowest correlations after short funds were currency, convertible, and call-write funds, as is typically the case.

Dollar-Weighted Category Return

Dollar-Weighted Category Performance

    On the week's dollar-weighted performance, only 2 of 26 categories ended the week black - short funds and China funds, returning a respective 2.87% and 1%.  Another 3 categories ended the week only marginally red, falling at most 0.36% percent - currency funds, Japan funds, and broad Asia funds.

    The remaining 21 categories were down at least 1% (call/write) and, at worst, nearly 7% (infrastructure).  Of these categories, the average return was nearly 3% down.

    With the week at last done, there still does not seem to be a single non-psychological motivator for the broad market losses.  Both gold and oil ended the week down, but stock and bond market returns do not seem to match what we would expect in such a week. 

    One possibility I offer as a suggestion is that foreign investors, having enjoyed the past two months, view the current dollar strength as a local maximum.  The US Dollar Index, having dropped throughout the market rally, is believed by most to continue to decline in the medium-term.  Given this, then regardless of their investment type, the current dollar high would provide them the best return after conversion to their home currency, thus explaining an otherwise unexplainable lack of historical correlation between asset classes.