The Factor Report

Market Wrap

For the week ended January 27, 2023, stocks were higher everywhere. Investors had a lot to digest this week with no Federal Reserve to play mind games as the central bank went into a quiet period before its next meeting. Early in the week, a report showed that US leading economic indicators were softer than expected, which was cheered for its potential to get the Fed off aggressive rate hikes. However, a number of big layoffs, notably Goldman Sachs and Microsoft, allowed fears of a recession to creep in. That mood was reversed on Thursday when a report showed stronger-than-expected US economic output and another that showed a healthier-than-expected housing market. Finally, on Friday investors got in a good mood that showed the Fed's preferred measure of inflation (Personal Consumption Expenditure prices) continues to cool. Bonds were volatile, but ultimately ended lower as the yield on the 10-year US treasury rose to 3.52%, according to MarketWatch.

Performance Summary

Geographically, it was the US that rebounded from a weak prior week. There was little difference in the returns of Non-US Developed and Emerging Markets, although both remain well ahead of the US thus far in 2023. No factors beat the broader market this week, although Value was in-line. Investors focused their buying on Tech and Tech-related shares, which benefitted our increased exposure to the top 100 Nasdaq stocks (QQQM). 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 explanation of what it means to "short" a stock (and the associated risks).

https://www.marketwatch.com/story/why-naked-short-selling-has-suddenly-become-a-hot-topic-11674503568?mod=home-page

An informative piece on how mortgage rate moves affect your ability to purchase a home.

https://www.marketwatch.com/story/this-little-known-metric-tells-you-how-a-mortgage-rate-move-impacts-your-ability-to-buy-a-home-11674502896?mod=home-page

A look at what happened on the New York Stock Exchange this week when many blue chip stocks saw their prices fall double digits at the open. We get asked a lot why we wait a half hour before we start trading accounts. This is why.

https://www.thinkadvisor.com/2023/01/24/nyse-gets-wave-of-sell-orders-unleashing-stock-market-chaos/?kw=NYSE%20Gets%20Wave%20of%20Sell%20Orders%2C%20Unleashing%20Stock-Market%20Chaos&utm_source=email&utm_medium=enl&utm_campaign=breakingnewsalert&utm_content=20230124&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.

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)

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.