The Factor Report

Market Wrap

Stocks managed to eke out a slight gain globally for the week ended September 24, 2021. After two consecutive weeks of losses, investors finally returned with their eyes on two major items. First, the week started out rocky as panic set in about the massive debt load of Evergrande, a large Chinese property company. However, buyers showed optimism in the ensuing sessions that the effect would be contained, primarily because the Chinese government would step in (that's what we should expect now, right? Companies who take on unmanageable debt to be bailed out by taxpayer dollars?). Second, the Federal Reserve announced that they would be starting the cessation of their bond buying program within the next couple of months, but that was old news. The central bank still did not indicate when it thinks raising interest rates will be required. Bonds took the cue from the Federal Reserve that growth is on track and ended the week sharply lower as the yield on the 10-year US treasury closed up at 1.46%, according to MarketWatch.

Performance Summary

Geographically, the US was the winner again and was the only region to turn in a positive result. Emerging Markets sank again, falling over 1%. From a factor perspective, only Momentum bested the broader market. A quick note on the difficult week and year for factors: the US is dominant in the ACWI (All Country World Index) and factors have been out of favor in the US. However, factors are well-known to be less effective (not ineffective) in the US, which is why we have more market exposure domestically. 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

Please click here for a debate between two prominent investors about whether stocks are in a bubble. Both investors run funds that have high fees in our opinion. This is what high fees gets for investors – two people wasting time predicting the future.

Please click here for an article titled When you should – and shouldn’t- invest in a Roth 401(k). Hint: as we always say, think about when your tax rate will be highest – now or in retirement.

Please click here for an article that looks at Congress’ efforts to eliminate the backdoor Roth IRA and what to (potentially) do about it.

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)

Metric Financial, LLC (“Metric”) is a registered investment adviser offering advisory services in the State of Connecticut and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. Follow-up or individualized responses to consumers in a particular state by Metric in the rendering of personalized investment advice for compensation shall not be made without our first complying with jurisdiction requirements or pursuant to an applicable state exemption.

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.