The Factor Report

Market Wrap

It was another noisy, albeit flat, week for stock markets around the world during the week ended March 5, 2021. To be realistic, global assets are seeing a reset to a pre-pandemic state. Recall that during lockdowns, interest rates plummeted as did stock prices due to fears about economic growth. Following that, shares of Technology and Technology-related companies soared as the world adjusted to a "stay at home" economy. The world is now preparing for a "return to normalcy" - interest rates have risen significantly, especially in recent weeks, and Tech-related shares have given up a lot of ground to those of more cyclical companies. Much of the concern has to do with valuation in that the stocks of those companies have risen so much and there may be some challenges in meeting earnings expectations with rising borrowing costs. All of this came to a head this week as investors wrestled with a strong US jobs report, accelerating vaccination efforts, Fed Chairman Powell's alert about economic growth, and a spike in interest rates. Bonds again moved meaningfully lower for the week as the yield on the US 10-year treasury note rose to 1.57%, according to MarketWatch.

Performance Summary

Geographically, the US took the lead with Emerging Markets not far behind, although both were just above the flatline for the week. Non-US Developed delivered a negative return. From a factor perspective, Momentum was battered again as investors turned in Tech stocks for cyclical ones, leading to strong performance for Value, Size, and Low Volatility. The long-term results continue to demonstrate factor efficacy, as shown in the table to the right. As can be seen, for the 15-year periods 3 out of 5 factors win although Size is close for a fourth.

In The News

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Disclosures

Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy will be profitable or equal the corresponding indicated performance level(s). Moreover, you should not assume that any of the above content serves as the receipt of, or as a substitute for, personalized investment advice from Metric Financial.

USA is the MSCI USA index, Non-US Developed is the MSCI EAFE index, Emerging Markets is the MSCI Emerging Markets index, and All Country World is the MSCI ACWI index. One cannot invest in an index. Because the factor indexes have varying inception dates, some of the returns provided are back-tested and do not represent actual performance. Inception dates are as follows:

Momentum = MSCI ACWI Momentum NR USD Index (Inception: 11/30/95)

Value = MSCI ACWI Enhanced Value NR USD Index (Inception: 5/29/15)

Quality = MSCI ACWI Quality NR USD Index (Inception: 5/29/92)

Low Volatility = MSCI ACWI Minimum Volatility (USD) NR USD Index (Inception: 5/28/93)

Size = MSCI ACWI Risk Weighted NR USD Index (Inception: 4/6/11)

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All written content is for information purposes only. Opinions expressed herein are solely those of Metric, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.