The Factor Report

Market Wrap

For the week ended September 29, 2023, stocks were lower everywhere...again. During a week of little data, investors continued to digest the prior week's Federal Reserve meeting, at which Chairman Powell did not announce a rate hike, but avowed rates would stay higher for longer. There was also an assurance that another increase is coming this year. This dashed market optimism that inflation was cooling enough to send interest rates lower by early next year. Late in the week, it got confusing. On Thursday, 2Q GDP was reported in-line with expectations and GDP prices were below forecasts. On Friday, the PCE Price Index (the Fed's preferred measure of inflation) came in lower than expected, both before and after food and energy prices. So this leaves investors scratching their heads - if inflation is coming down, will the central bank stick to their script? The short answer is no. This is why we don't react to short-term news and market moves. The Fed will react to data. They've already changed their tune a couple of times and will again if the data tells them to. That's a good thing. Bond investors were also wary of the Fed line and sold the 10-year US treasury, sending its yield higher to 4.58% according to MarketWatch.

Performance Summary

As shown in the table, the US was finally a winner on the week as it held up better than Non-US Developed and Emerging Markets. Within the US, it was surprisingly the Tech-heavy Nasdaq that fared best, actually delivering a positive return. Higher interest rates would ordinarily bias investors against growth stocks. From a factor perspective, Quality outperformed the broader market. The long-term results continue to demonstrate factor efficacy. For the 15-year period 3 out of 5 factors beat the market with Size not far behind for a fourth.

In The News

A history of US government shutdowns.

https://www.history.com/news/us-government-shutdowns-facts

Why bond yields are so important to the returns of investment assets.

https://finance.yahoo.com/news/what-sky-high-bond-yields-mean-for-investors-an-explainer-202141648.html

An OPINION piece on why investor concerns about the stock market are overblown.

https://www.marketwatch.com/story/fear-on-wall-street-heres-why-investors-need-to-shake-it-off-say-these-strategists-9c9d0259?mod=home-page

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 data and performance information sourced from Morningstar and MarketWatch, 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.