The Factor Report

Market Wrap

For the week ended March 24, 2023, stocks were higher everywhere. There was a lot to "unpack" this week. In the wake of the Silicon Valley Bank failure, investors were left to wonder whether this was bank-specific or more systemic. While we can't conclude that it is systemic just yet, it did reveal some other problems like Signature Bank and First Republic. This soon spread overseas to Credit Suisse and more recently Deutsche Bank. Signature Bank has since been shuttered by the State of New York, First Republic received cash infusions from 11 larger banks, and Credit Suisse was sold to UBS at a massive discount. All of these bank woes led investors to believe central banks would need to cease rate increases, but the regulators disagreed. The European Central Bank hiked by 0.5% and the Federal Reserve hiked by 0.25%. While this worried traders, ultimately they showed optimism that the end to rate increases is drawing nigh. Bond investors were also in a buying mood, sending the yield on the 10-year US treasury lower to 3.38%, according to MarketWatch.

Performance Summary

As shown in the table, all regions performed well, but it was Emerging Markets that bested their developed counterparts. Within the US, it was Tech and Tech-related stocks that fared best, mostly due to the struggles of financial stocks. From a factor perspective, Momentum and Quality outperformed the broader market. The long-term results continue to demonstrate factor efficacy. For the 15-year periods 3 out of 5 factors beat the market with Size not far behind for a fourth.

In The News

A great piece using charts to show why the rise in interest rates may be over.

https://www.marketwatch.com/story/these-charts-suggest-the-u-s-10-year-treasury-yields-uptrend-has-ended-47b76847?mod=home-page

10 Sobering Stats on Retirement in 2023.

https://www.thinkadvisor.com/2023/03/21/10-sobering-stats-about-americans-retirement-preparedness/?kw=10%20Sobering%20Stats%20on%20Retirement%20Planning%20in%202023&utm_source=email&utm_medium=enl&utm_campaign=newsroomupdate&utm_content=20230323&utm_term=ta&oly_enc_id=6911H2583589A7Z

A must-read on the relationship between the economy and the stock market.

https://insights.finominal.com/research-myth-busting-its-the-economy-stupid/

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.

All performance information sourced from Morningstar, unless otherwise indicated.

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.