Major indices fight off correction territory as markets digest recent Fed policy action

Market Summary

US Market: 3/14/2025 - 3/20/2025

• U.S. headline indices rebounded from their recent decline as the S&P 500 increased 0.4%, the NASDAQ fell -0.4%, and the Dow Jones increased 1.1%.
• The rebound in US equity indices came on the heels of the much anticipated Federal Reserve meeting. The central bank maintained interest rates at 4.25% to 4.50%, citing concerns over slowing economic growth and rising inflation. Chair Powell’s dovish remarks gave some comfort to investors citing the inflationary impacts of tariffs on the economy are likely “transitory”.
• Global stock markets have experienced mixed reactions following last week’s decline in U.S. stocks. Asian markets, particularly in Hong Kong and China, have rallied due to the success of Chinese AI model DeepSeek's R1, boosting indices like the Hang Seng Index and the MSCI China Index by 20% this year. European markets have also seen gains driven by government spending plans. However, President Trump's trade war is causing significant concerns, especially in export-focused Asian economies such as Japan and South Korea, potentially impacting industries across the region
• Geopolitical tensions in the Middle East and fears of a global trade war have driven gold prices to a record high of $3,038 per ounce. Investors are flocking to safe-haven assets, reflecting heightened market uncertainty.

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 US Extreme Movers portfolio saw a 17.6% return this week, ranking in the 71st percentile for the trailing twelve months and the 80th percentile since inception. This level of performance marks the week as being “Neutral”.
• Factors accounted for 21.6% of the total return, placing the portfolio in the “Neutral” category. This ranks in the 78th percentile for the trailing twelve months and the 70th percentile since inception.

International Extreme Movers Volatility and Factor-Driven Speedometers

• The International Extreme Movers portfolio earned a 17.4% return, placing it in the "Volatile" category for the week. This return ranks in the 86th percentile over the trailing twelve months and the 77th since inception.
• Factors accounted for 35.9% of the total return, which classifies as "Very Factor Driven". This level of factor return is in the 47th percentile for the portfolio over the trailing twelve months and the 44th since inception.

US Extreme Movers Portfolio Exposures

• The energy sector remained the largest sector in the US extreme movers portfolio with an 18% allocation this week. This was in the 94th percentile over the past year and the 86th percentile since the portfolio started. Within the energy sector, the Oil, Gas & Consumable Fuels industry accounted for 17% of the portfolio.
• Financials was the second-largest allocation in the portfolio with 11%, ranking in the 73rd percentile for the past twelve months and the 80th percentile since the portfolio's inception. Capital Markets was the biggest contributor at 5%.
• Consumer Discretionary was the least represented sector this week, registering a -21% allocation for the second straight week. This placed the sector in the 10th percentile over the past twelve months and the 5th percentile since the portfolio’s inception. The majority of this short allocation came from the Specialty Retail industry, which made up -9% of the portfolio.

• Growth factors were in favor this week, while both Beta & Volatility and Value factors had a decidedly neutral week. Growth exposure was driven by Consumer Discretionary shorts indicating that investors were shorting low growth names in the sector.
• Quality Factors were out of favor this week. Management Quality ranked in the 9th percentile over the trailing twelve months and the 15th since inception. This was also driven by the portfolio’s short Consumer Discretionary position. Earnings Quality was similarly out of favor as it placed in the bottom quartile over both the trailing twelve months and the portfolio’s lifespan. This low exposure was driven by the long book and Energy names in particular.
• Macro factors were in favor this week. Interest Rate Beta and Oil Beta both placed at or above the 90th percentile over the trailing twelve months. Both factors were driven by the Energy sector as investors bought names with high exposure to Interest Rate and Oil Beta.

International Extreme Movers Portfolio Exposures

• The Financials sector was the most represented sector in the International portfolio this week, with a 12% allocation. This places the sector in the 83rd percentile for the trailing twelve months and the 82nd percentile since the portfolio's inception. Within this sector, Insurance was the leading industry, making up over 5% of the portfolio allocation.
• Industrials ranked as the second most represented this week, with a 7% allocation. This places the sector in the 70th percentile for the trailing twelve months and the 82nd percentile since the portfolio's inception. This exposure was driven primarily by the Aerospace & Defense industry at 4.73%.
• Information Technology remained the least represented sector, its allocation was -15% this week. This allocation places the sector in the 6th percentile for the trailing twelve months and the 3rd percentile since the portfolio's inception. Electronic Equipment, Instruments & Components (-5.33%) and Semiconductors & Semiconductor Equipment (-4.73%) drove most of the negative exposure for the sector.

• Quality was out of favor this week. Earnings Quality tallied its lowest exposure over the past year while both Profitability factors placed in the bottom quintile over the trailing twelve months and since inception. The negative Earnings Quality exposure came primarily from the portfolio’s long Industrials position while the Profitability exposure was driven by the portfolio’s long book as investors looked to buy names with low exposure to these factors.
• Investors moved to purchase names with high oil beta exposure as the long book drove the portfolio’s exposure to the factor to the 92nd percentile over the trailing twelve months.
• Short interest was also in favor with international investors this week as exposure to the factor ranked in the top decile over the trailing twelve months and since inception. This exposure was driven by the long book and Materials names in particular.

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 again in favor this week with a 12% allocation, placing the region in the 71st percentile for the trailing twelve months and the 67th since the portfolio's inception. In contrast, Developed Markets saw a -12% allocation this week, which placed the region in the 23rd percentile for the trailing twelve months and the 26th percentile since the portfolio's inception.
• Within Emerging Markets, The Americas had the highest allocation at 20%, with Brazil again the largest contributor at 18%. Europe, Middle East & Africa had the lowest allocation in the portfolio at -15%, with Turkey and Saudi Arabia representing significant shorts.
• For Developed Markets, Europe & the Middle East had the lowest allocation at -11%, with Israel being the primary driver, contributing -4% on its own. This was Israel’s lowest allocationover the trailing twelve-month period. The Pacific region saw a -4% allocation, with Hong Kong contributing -3%.

Regards,

Colin