Resources featuring Alex Lustig

Q1 2024 Factor Performance Analysis

In Q1 2024, global equity markets performed strongly, with the MSCI ACWI returning just above 8%. The US market favored Growth, Volatility, and high Momentum stocks, driven by a clear risk-on factor profile, while Europe saw outperformance in Size and Momentum. In contrast, the UK market positioned defensively, showing a preference for Value and Yield stocks over Growth and Volatility. Emerging Markets were led by Momentum, with Value and Growth stocks also marginally outperforming. Canada exhibited a mix of US and EM trends, with a notably larger factor premium for Value and Growth compared with its peers. 

February 2024 Factor Performance Analysis

Equity markets have continued to do well as the MSCI ACWI returned 4.29% in February, surpassing the previous all-time high observed in 2021. The Momentum surge, most notably in the US, continues to be driven by a concentrated number of firms since the S&P 500 outperformed its equal-weight counterpart by about 1.2% in February. Over the last three months, the S&P 500 has returned 11.7% while its equal-weight counterpart trailed it by 1.9%, returning 9.8% in the same period. 

January 2024 Factor Performance Analysis

January continued the momentum observed in December, leading to new all-time highs in equity markets across the world, but especially in the United States. Although there has been no official news from the Fed with details regarding potential rate cuts, the market seems to have priced this in. Furthermore, equities have never been narrower than today, as a substantial portion of the returns have been led by the Magnificent 7 stocks in the US: the equally weighted S&P 500 index returned only 1.2% while the market cap weighted return was above 3% in January.

Factors and falling interest rates

Growth equity performance On December 15th, the Federal Reserve delivered a significant announcement, suggesting possible federal funds rate cuts in 2024. This revelation triggered a ripple effect across global equities, leading to an “everything” rally near the end of the year as markets priced in anticipated rate reductions as early as Q1 2024. While the […]

2023 Factor Performance Analysis

Among substantial challenges, including rising geopolitical tensions in Ukraine and Israel and persistent inflationary pressures on the global economy, the third quarter of 2023 witnessed a loss of momentum in equity markets. However, the scenario shifted dramatically in Q4, especially on December 15th. In the US, the Federal Reserve’s optimistic comments sparked an unexpected “everything rally” to close out the year strong, propelling equity markets to the last all-time high seen in December 2021. Federal Reserve Chairman Powell’s acknowledgment of “clear progress” towards their long-term 2% goal and the Fed’s awareness of the risk of holding policy too tight for too long has injected significant optimism into global markets. As a result, the MSCI ACWI closed the year at +22% in 2023.

November 2023 Factor Performance Analysis

Following three consecutive monthly declines, public equity markets in developed and emerging markets rebounded, returning nearly 10% across most regions except for the UK. From a factor perspective, stocks with high volatility over the last year played a crucial role in driving returns this month, followed by a renewed interest in Growth equity in Europe and Emerging Markets, particularly forecasted growth. The UK stood out as an outlier, being the only region to prefer Value stocks and eschewing Growth, resulting in a modest 3% return for its public equity market in November.

October 2023 Factor Performance Analysis

In October, global equity markets continued their descent with the MSCI ACWI posting another 3% decline this month. This extends the cumulative downturn to over 9% in the last three months. Despite this, positive performance earlier in the year has kept the index at a favorable +10% year-to-date (YTD). From a regional perspective, the downturn affected all markets with Canada (-5.7%) leading the decline while the US (-2.7%) outperformed, while other regions performed similarly, recording a -4% decline.

Exploring the relationship of interest rates to value vs growth investment strategies

After the economic turmoil caused by the COVID-19 pandemic, developed economies faced inflation rates reminiscent of the early 1980s. With the United States and the United Kingdom embarking on an unprecedented cycle of interest rate hikes to counter inflation, investors were left wondering about the potential impact on equity markets. Specifically, the question was whether […]

Q3 2023 Factor Performance Analysis

During the third quarter of 2023, global equity markets lost the momentum that had propelled markets earlier in the year as it grappled with substantial challenges including rising geopolitical tensions in Ukraine and Israel as well as continued inflationary pressures on the global economy. The MSCI ACWI, while still showing a year-to-date gain of over 10%, experienced a sharp decline in September, with a quarterly return dropping to -3.4%, a stark contrast to the robust performance in the initial two quarters.

August 2023 Factor Performance Analysis

In August, global public equities fell by about 4.3% as measured by the MSCI ACWI, but are still up over 10% this year. Although all regions in this report realized negative returns in August, US equities led the way with just -2%, closely followed by the UK at -2.4%. European, Emerging Markets, and Canadian equities on average lost 4%. The US continues to be the only region to favor Growth equity, but instead of volatile growth stocks as previously observed, the US market favored large cap, high quality growth companies with stable growth while all other regions preferred Value stocks.