Big Tech Drives Markets

Market Summary

US Market: 12/6/2024 - 12/12/2024

• The Nasdaq was up 0.7% over the past five trading days. The Dow Jones fell 2.13%, and the S&P 500 was down -0.67%.
• Chip-technology stocks drove the gains in the Nasdaq as Broadcom Inc. surged 20% Thursday, surpassing $1 Trillion in Market Cap, after predicting a spike in demand for its AI chips.
• The S&P 500’s recent rally is becoming increasingly top-heavy as Thursday marked the ninth straight day in which the number of stocks falling was greater than those that were rising within the index. This is the longest streak since Bloomberg began tracking the metric in 2004.

Extreme Movers Portfolio Performance

Note: Extreme Movers definitions can be found in the Factor University section on our website.

US Extreme Moves Volatility and Factor-Driven Speedometer

• The US Extreme Movers portfolio posted a 14.7% return this week, ranking in the 50th percentile for the trailing twelve months (TTM) and the 65th percentile since inception (ITD). This performance designates the week as "Volatile."
• Factors contributed 13% to the total return, placing the portfolio in the 11th percentile for TTM and the 13th percentile since inception. This level of factor return categorizes the portfolio as "Very Alpha-Driven."
• Weeks that are both “Volatile” and “Very Alpha-Driven” present good opportunities for fundamental managers, as strong returns are being driven by stock-specific movements rather than broad systematic market trends.

International Extreme Movers Volatility and Factor-Driven Speedometers

• The International Extreme Movers portfolio achieved a 13.5% return, ranking in the 6th percentile for the TTM period and the 31st percentile for ITD period. This level of performance categorizes the week as “Calm”.
• Factors accounted for 26.3% of the total return, placing in the 57th percentile for the trailing twelve months and the 47th percentile since inception. This factor contribution indicates a “Neutral” classification for the week.

US Extreme Movers Portfolio Exposures

• Consumer Discretionary saw the largest allocation in the US portfolio this week, placing in the 96th and 94th percentile over the trailing twelve month (TTM) and inception-to-date (ITD) periods. Specialty Retail drove half of this allocation at 10%.
• Industrials was the bottom sector with a -14% allocation this week, placing in just the 2nd percentile TTM and the 6th percentile ITD. All industries except Building Products and Passenger Airlines contributed to the negative allocation, with Construction & Engineering being the largest concentration at -4%.
• Materials was also notably low, with a -9% allocation that placed in the 7th percentile TTM and 8th percentile ITD. All industries were negative, with Metals & Mining driving the most at -4%.

• Beta and Volatility factors were fairly neutral but slightly in favor this week, with the exception of Axioma’s Market Sensitivity. Both Beta and Volatility were driven by the long book, suggesting the investors were buying more high-beta and high-vol names than they were selling.
• Growth and Value were both out of favor this week. The negative Growth exposure was driven by the long book, as investors favored buying low-growth names. Dividend and Earnings Yield were also driven by the long book, with investors leaning into low-value names.
• Interest Rate Beta and Oil Beta were negative, with both factors falling below the 25th percentile TTM. The negative Interest Rate Beta was driven by the long and short book, as investors sold names that benefit from rising rates, while also buying names that benefit from lower rates. Oil Beta was similar, with investors both selling high-oil-beta names and buying low-oil-beta names, suggesting a bet against rising oil prices.
• HF Crowding was negative this, reaching the 31st percentile TTM. This was driven by the short book, indicating that investors sold out of popular hedge fund longs. Short Interest, on the other had, was notably positive reaching the 91st percentile both TTM and ITD. This was driven by both sides of the book, as investors bought popular shorts and sold unpopular shorts.

International Extreme Movers Portfolio Exposures

• Industrials dropped from last week’s top spot to the bottom of the International portfolio, with a -7% allocation that placed in the 6th percentile TTM and 11th percentile ITD. Capital Goods drove most of this allocation, accounting for -5% of the sector.
• Real Estate was the second lowest sector this week, ranking in the 13th percentile TTM and 14th percentile ITD. This was largely driven by Retail and Diversified REITs in Australia (-3%) and Real Estate Management & Development in Japan (-2%).
• Consumer Discretionary was the top sector at 15%, marking the highest position the sector has seen over the trailing-twelve-months. All industries except Leisure Products contributed positively, with Automobiles - particularly in Hong Kong and Germany - being the biggest driver at 6%.

• Beta and Volatility were both in favor this week, with all factors ranking above the 70th percentile TTM. Both factors were driven by the long book, suggesting that investors leaned into higher-beta and more volatile names.
• Growth was moderately negative, while Value saw mixed results this week, with Dividend and Earnings Yield factors being positive, while Value was negative. The positive Dividend and Earnings Yield exposures were driven by the short book, as investors sold low-value names.
• Oil Beta and Interest Rate Beta were positive, reaching the 60th percentile and 51st percentile TTM respectively. Both factors were driven by the long book, as investors bought into names that benefit from rising oil prices and rising interest rates.
• HF Crowding was negative, ranking in the 27th percentile TTM, while Short Interest was positive, ranking in the 81st percentile TTM. HF Crowding was mainly driven by the long book, as investors bought less popular names. In contrast, Short Interest was driven by the short book, as investors sold unpopular shorts.

International Extreme Movers Portfolio Country Exposures

This chart presents the portfolio's exposures to various groups in the Developed and Emerging Markets, highlighting the three most notable country contributors for each respective group's allocation.

• Emerging Markets were favored this week with a 30% allocation. This was in the 83rd percentile for the trailing twelve months and 85th since inception. In contrast, Developed Markets saw a -29% allocation, ranking in just the 13th percentile for the trailing twelve months and 12th percentile since inception.
• Within Developed Markets, the Pacific region had the lowest allocation, reaching just the 2nd percentile over the trailing-twelve-month period. This was driven by Australia’s -15% allocation along with Japan’s -14% allocation, both of which ranked in the bottom quintile over the trailing twelve months. Despite this, France and Italy saw notably high allocations, with both placing in the top decile for the same period.
• In Emerging Markets, Asia led the way with a 14% allocation, followed by EMEA at 12%. China was the main driver within Asia, with its 29% allocation ranking in the 92nd percentile since inception. EMEA’s exposure was notably high, ranking in the top decile both TTM and ITD, and was mostly driven by the 5% allocation to South Africa.

Regards,

Colin