Bitcoin Boom Skirts Landmark $100,000

Market Summary

US Market: 11/15/2024 - 11/21/2024

• U.S. headline indices saw mixed performance again this week. The Dow Jones Industrial Average led the pack with a modest gain of 0.4% over the past five trading days. Meanwhile, the S&P 500 ended the period neutral with a 0% return, followed by the Nasdaq, which posted a decline of -0.6%.
• Gold is headed for its biggest weekly gain since October 2023. Demand for gold has seen increasing momentum with the Fed’s interest rate cutting and central bank buying cycles, along with being a safe-haven asset with recent escalations in the Russia-Ukraine conflict - the asset is widely expected to set new record highs in 2025.
• The post-election Bitcoin boom has continued, propelling the token toward the $100,000 mark on expectations of friendly US regulations under the Trump administration. Estimates show that the crypto market as a whole has gained around $1 trillion since the election on November 5th.

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 Speedometers

• The U.S. Extreme Movers portfolio delivered a 17.1% return this week, placing it in the 73rd percentile for the trailing twelve months and the 78th percentile since its inception. This performance categorizes the week as "Volatile."
• Factors accounted for 22.4% of the total return, placing in the 45th percentile for both the trailing twelve months and since inception periods. This earns a classification of “Neutral”. Of the total factor return, almost three quarters was driven by industry movements, rather than style factors.

International Extreme Movers Volatility and Factor-Driven Speedometers

• The International Extreme Movers portfolio posted a 16.2% return this week, ranking in the 61st percentile on a trailing twelve-month basis and the 66th percentile since inception. This performance categorizes the week as "Volatile."
• Factors returns accounted for 21.6% of the total return, landing in the 39th percentile for the trailing twelve months and the 26th percentile since inception. This level of factor return classifies this week as “Alpha-Driven”.
• Weeks that are both volatile and alpha-driven present good opportunities for fundamental managers. During such periods, strong returns are typically driven by stock-specific movements rather than broad systematic market trends.

US Extreme Movers Portfolio Exposures

• Energy emerged as the most represented sector in the US portfolio with a 13% allocation. This places the sector in the 95th percentile for trailing twelve months and the 80th percentile since inception. All of this exposure came from the 'Oil, Gas & Consumable Fuels' industry.
• Utilities ranked as the second most represented sector in the portfolio this week, with a 12% allocation. This places the sector in the 94th percentile for the trailing twelve months and the 95th percentile since inception. Every industry within the sector contributed to this exposure, with the 'Independent Power and Renewable Electricity Producers' and 'Electric Utilities' industries leading the way at 4% representation each.
• Health Care dropped as the lowest allocation at -24%. This places it in the 5th percentile over the trailing twelve months and the 3rd percentile since the portfolio's inception. The 'Life Sciences Tools & Services' industry had the most significant impact, contributing by -15% alone.

• Beta and Volatility factors showed mixed exposures this week. Beta (Barra) underperformed, landing in the 31st percentile for the trailing twelve months. In contrast, Residual Volatility (Barra) and Volatility (Axioma) were in favor, this was driven by the portfolio's long book.
• Growth factors were in favor this week. Growth (Axioma) landed in the 73rd percentile for both trailing twelve months and since inception basis. This exposure was primarily driven by the short book, indicating that investors favored selling low-growth names.
• Quality factors were out of favor this week, with all but Wolfe’s Profitability showing negative exposures. Barra’s Management Quality was notably out of favor, ranking in the bottom third of all data points since inception and over the trailing twelve months. This exposure was primarily driven by short positions in Industrials and long positions in Financials.
• Macro factors were in favor this week, especially for Oil Beta which landed in the 92nd percentile for trailing twelve months. This exposure was driven to the long allocation to the Energy sector.

International Extreme Movers Portfolio Exposures

• Financials remained the most represented sector this week, with a 9% allocation, positioning it in the 66th percentile on a trailing twelve-month basis. The largest contributions came from the Insurance and Banks industries, accounting for 4.55% and 3.98% of the allocation, respectively.
• Communication Services surged to become the second most represented sector this week, climbing from -2% last week to 8%. This sharp increase places the sector in the top decile for the trailing twelve months. The primary contributors to this allocation were the "Entertainment" and "Diversified Telecommunication Services" industries.
• Information Technology was the least represented sector this week, with a -15% allocation—a notably low level for the sector. This placed it in the 2nd percentile for the trailing twelve months and the 3rd percentile since the portfolio's inception. The "Semiconductors & Semiconductor Equipment" industry accounted for more than half of this sector's total allocation.

• Beta and Volatility factors were out of favor this week, with Barra’s and Axioma’s volatility factors landing near the bottom decile for both the trailing twelve months and since inception. This negative exposure was primarily driven by the portfolio’s short book, particularly short allocations in the “Information Technology” sector.
• In contrast, Value factors performed strongly this week. Both Axioma’s and Barra’s value metrics ranked near the top decile for the trailing twelve months. This positive exposure was primarily driven by the portfolio’s long book, indicating that investors favored stocks with high exposure to value factors.
• Crowding factors showed mixed results this week. Short Interest was out of favor, landing in the bottom quintile of the data. This was driven by the portfolio’s long book, indicating a preference for names with low exposure to Short Interest. On the other hand, HF Crowding was favorable, ranking in the top decile for both the trailing twelve months and since inception. This positive performance was primarily driven by the short book, reflecting a focus on selling names with low exposure to HF Crowding.

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 in favor this week, with a 3% allocation, placing the segment in the 61st percentile for the trailing twelve months. In contrast, Developed Markets saw a -5% allocation, ranking in the 31st percentile for the trailing twelve months and the 37th percentile since inception.
• Within Emerging Markets, Asia stood out as the most represented region with a 4% allocation. Korea dominated, contributing 14% alone, which positioned it in the 96th percentile since inception. In contrast, Europe, the Middle East, and Africa detracted from Emerging Markets' allocation, with Greece, Turkey, and Poland being the most significant negative contributors at -2% each.
• In Developed Markets, Europe and the Middle East were the most significant regions, with a -7% short allocation. Sweden was the primary contributor, accounting for -6% alone, placing it in the 4th percentile since inception. The Pacific region also contributed negatively to the short allocation, with Japan being the main contributor at -11%.

Regards,

Jose