The Factor Report

Market Wrap

For the week ended June 24, 2022, stocks were higher everywhere. Investors started out the holiday-shortened week optimistic about impending Senate Banking Committee testimony from Federal Reserve Chairman Jerome Powell. There was also some bargain hunting to be done after last week, the worst for the S&P 500 since the "Covid crash". During Powell's two-day inquisition, markets meandered a bit, but on Friday investors were in a buying mood and sent the S&P higher by more than 3%. This all came amid new Covid cases in Europe as well as Wall Street firms hiking their bets on a US recession, which Powell admitted is possible, but does not believe will happen. It should be noted that a lot of this talk is late as US GDP was negative in the first quarter, so we only need a negative second quarter report to be officially in a recession. Also remember that economy does not mean stock markets and vice versa. Although they bounced around quite a bit, bonds rose as the yield on the 10-year US treasury fell to 3.13%, according to MarketWatch.

Performance Summary

Geographically, the US ended its losing ways and was by far the best performing region, up over 6.5% on the week. Non-US Developed returned less than half that and Emerging Markets was just above flat. From a factor perspective, only Quality generated returns above the broader market, but our exposure to the Tech-heavy Nasdaq also paid off. The long-term results continue to demonstrate factor efficacy, as shown in the table. As can be seen, 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 on the levels of cash being held by investors - now above the level seen early in the pandemic.

https://www.marketwatch.com/story/investors-have-stocked-away-more-cash-now-than-in-the-early-days-of-the-pandemic-jpmorgan-finds-11655978236?mod=home-page

A deeper dive on a chart we shared a few weeks ago - how stocks fare before, during, and after recessions. The key sentence: "Remember, the stock market is not the economy."

https://www.forbes.com/sites/kristinmckenna/2022/04/01/how-stocks-perform-before-during-and-after-recessions-may-surprise-you/?sh=e99e987249d0

A look at the Secure Act 2.0, which passed the Senate this week. This includes important provisions about 401k plans, including waiving of some penalties and rollovers.

https://www.thinkadvisor.com/2022/06/22/second-senate-secure-act-2-0-bill-sails-through-committee/?kw=Second%20Senate%20Secure%20Act%202.0%20Bill%20Sails%20Through%20Committee&utm_source=email&utm_medium=enl&utm_campaign=compliancewatch&utm_content=20220624&utm_term=tadv

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.