Checking in on Market Sensitivity

In last week's Factor Spotlight, we discussed how the Market Sensitivity (Beta) factor was being flagged as Overbought and appeared to be reaching an inflection point. I wanted to quickly follow up as the factor has indeed seen a sell-off on both a cumulative and normalized basis in the global and US markets.  

US Market - Trailing 12 Months

• In the US, cumulative return hit a peak of +4.05% on May 17th, and has since fallen to +3.41% on May 31st. Normalized return hit a peak of 1.44 standard deviations above the mean on May 23rd, and has since dropped to 1.18 SD above the mean.  

Global Market - Trailing 12 Months

• In the worldwide market, cumulative return saw a recent peak of +2.55% on May 22nd, and has since dropped to +2.11%. On a normalized basis, return peaked on May 22 at +1.28 SD above the mean, and now sits at 0.89 SD above the mean (where it is now flagged as a Neutral factor, but looks to still have room to fall).

As a reminder, the long-term premia for Market Sensitivity is expected to be down over time, so what we're really witnessing is a reversion to the historical trend.

If you'd like to see the impact of any factor on your portfolio's performance and risk profile, or would like to better understand how we measure the relationships between factors, please don't hesitate to reach out.

Have a great weekend,
Omer