The Factor Report

Market Wrap-Up

Stocks were lower the week after a strong run. Investors continue to evaluate the trend of Covid-19 and its impact on economic growth. During the week, we were informed that global cases had topped 1 million with a fatality rate of about 5%. In the meantime, economic data releases were mixed. On the negative side, pending home sales were cut about in half, weekly jobless claims topped 6 million, and non-farm payrolls contracted by 701,000 versus expectations of losing 82,000. Another valuable forecast. On the positive side, consumer confidence, motor vehicle sales, and the ISM non-manufacturing index all came in well ahead of expectations. Interest rates, as measured by the US 10-year treasury yield, were lower for the week and finished under 0.6%, according to MarketWatch.

Performance Summary

Geographically, Emerging Markets fared the best for the week, followed by the US, and Non-US Developed sold off the most. From a factor perspective, only Quality and Low Volatility beat the market. Both factors have held up particularly well during the downturn. Based on YTD returns, the MSCI ACWI index would need a 32.2% return to recover losses. Global Quality and Low Volatility would need 22.2% returns to recover. The long-term results continue to demonstrate factor efficacy, as shown in the table to the right. As can be seen, for the YTD, 1-year, 3-Year, 5-Year, and 10-Year periods, 3 of 5 factors do better than the market. Over 15 years, 4 out of 5 win.

In The News

Please click here for a brief from Metric Financial explaining why the Low Volatility factor works over time.

Please click here for Connecticut Governor Lamont’s press release regarding mortgage payment relief.

Please click here for an article evaluating when to use ETFs vs. index mutual funds vs. active mutual funds. Hint: never use active mutual funds.

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.