Macro Holds Onto Its Grip Over Global Equity Markets

Please see below for our Market Summary and Omega Point’s Top Surprise Factors of the week.

The Surprise Metrics measure each factor's return divided by its predicted standard deviation. On a trailing one-week basis and since the invasion on Feb 24, we continue to see multiple standard deviation moves across a broad number of factors that continue to shift each week and are a unique indicator of the market's pulse regarding the significance of the ongoing crisis and its ramifications. The Surprise Metrics were initially introduced in our Feb 27 Factor Spotlight: Quantifying the Impact of Russia's incursion into Ukraine.

For a deeper dive into the methodology, use cases, and incorporation of Surprise Metrics into your decision-making, I encourage you to check our most recent factor spotlight series: Your Exposure to the New Economic Order - Part I, Part II, and Part III. And if you're interested in how to apply to macro specifically, we encourage you to check out our Mar 27 Issue on the topic.

Please don't hesitate to reach out to us if you have any questions, comments or to discuss ways to incorporate these and other metrics into your strategies.

US Market Summary and Surprise Metrics

US Market: 04/15/22 - 04/21/22

• The trailing week through Thursday’s close saw mixed performance from the three major US indices. The Dow was strongest, returning 0.99% while the S&P 500’s Tuesday gains were erased, ending up 0.02%. The Nasdaq was hardest hit, finishing Thursday’s session at -1.32% for the week.
• Federal Reserve Chairman Jerome Powell pointed to a likely 50 basis point hike in interest rates coming in May followed by a shrinking of the Fed’s assets held on its balance sheet.
• Russia has made public its objective to entirely take over the Donbas region of Ukraine as the UN called for renewed peace talks between the two nations and the United States increased sanctions against Russia.
• Elon Musk updates bid to acquire Twitter with a $46.5 billion financing package, despite Twitter’s threat of utilizing its poison pill defense against the take-over.

OMEGA POINT SURPRISE METRIC - TOP MACRO AND STYLE FACTORS

• Macro factors slowed this week but still remain the leaders in positive surprise. EU Term Spreads increased this week, pointing to a further steepening of the curve.
• The Short Interest factor in the US still shows strong signs of de-leveraging as heavily shorted stocks are being covered. Globally, it was the crowded long stocks that took the hit as evidenced by the global HF Crowding factor.
• Growth continued on a negative path while Earnings Yield has carried the torch on the value end of the spectrum, particularly in global factors.
• US Revisions is still the largest negative surprise factor, indicating that stocks with increasingly positive analyst sentiment are being sold off while stocks with increasingly negative sentiment are rallying. This points to a disconnect between the buy-side and sell-side.

OMEGA POINT SURPRISE METRIC - TOP SECTOR FACTORS

• This week, there was a slight, general pull-back across the key industry surprise winners and losers of the prior month and a half.
• Electrical Utilities’ climb slowed most, followed by Fertilizers & Agricultural Chemicals.
• Automobiles and Components, the biggest laggard throughout the course of the conflict, experienced the sharpest rebound across all regions.
• Consumer Staples (not shown) is no longer in significant negative surprise territory, indicating continued upward moves in the sector and a potential signal of the market preparing for recession.
• Emerging Markets Industrials and Energy were the positive surprise sectors that maintained an upward trajectory this week, led by Aerospace & Defense, Trading Companies & Distributors, and Oil, Gas, & Consumable Fuels.

Regards,
Kevin