Nasdaq Leads, Bitcoin touches $100K, and Speculation Concerns Rise

Market Summary

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

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• All three major U.S. headline indices recorded gains over the past five trading days. The Nasdaq posted the highest return at 3.36%, followed by the S&P 500 with a 1.27% gain, while the Dow increased by 0.1%.
• David Sacks' appointment as the AI and Crypto Czar marked a significant milestone, propelling Bitcoin past the $100,000 mark for the first time. However, former Treasury Secretary Larry Summers criticized Trump’s proposal for a national Bitcoin reserve, triggering a nearly 7% drop in Bitcoin's value.
• Bank of America warns investors that there may be excessive speculation in the stock and crypto markets while Treasuries, Equity Futures and the dollar remain stable ahead of payroll data.

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 posted a 14.4% return this week, ranking in the 42nd percentile for trailing twelve months and the 63rd percentile since inception. This performance designates the week as "Volatile."
• Factors contributed 32.4% to the total return, placing the portfolio in the 85th percentile for TTM and the 75th percentile since inception. This level of factor return categorizes the portfolio as "Factor Driven."

International Extreme Movers Volatility and Factor-Driven Speedometers

• The International Extreme Movers portfolio achieved a 15.0% return, ranking in the 40th percentile for TTM and the 52nd percentile for ITD. This level of performance categorizes the week as “Neutral”.
• Factors accounted for 28.0% of the total return, placing in the 66th percentile for the trailing twelve months and the 54th percentile since inception. This factor contribution indicates a Neutral classification for the week.

US Extreme Movers Portfolio Exposures

• Information Technology surged week-over-week to become the most represented sector in the US portfolio at 46%. This large increase puts IT at its highest allocation over the trailing twelve months and in the 99th percentile since inception. The exposure change was driven by large allocations to the Software (21%) and Semiconductors & Semiconductor Equipment (14%) industries.
• Consumer Discretionary had the second largest allocation in the portfolio this week with a 16% allocation. This placed in the 90th and 88th percentile for the sector over the trailing twelve months and inception-to-date respectively. Textiles, Apparel and Luxury Goods was the largest industry allocation at 7%.
• Real Estate had the lowest allocation in the portfolio this week and the lowest it has had over the trailing twelve months at -18%. Specialized REITs were the lowest industry group within the sector (-5%).
• Utilities saw the largest week-over-week decrease in the portfolio, falling 15%. This was in the 5th percentile for both the trailing twelve months and inception-to-date. The bulk of this decrease was driven by Electric Utilities, which fell 8%.

• Beta and Volatility factors were in favor this week. Both Beta factors placed in the top decile TTM and ITD, and were driven by long names in the IT sector. Wolfe’s Volatility factor also saw a very high allocation that was driven by long tech names.
• Growth was in favor this week, with both Barra and Axioma achieving exposures at or near the top of their trailing twelve month and inception-to-date percentiles. The positive exposure was driven by both the long and short sides of the book, as investors shorted low-growth names while also buying high-growth names particularly in the IT sector.
• Value factors were strongly out of favor this week. Every factor ranked under the first quartile over the trailing-twelve-month period, with Barra’s Dividend Yield factor ranking lowest.
• HF Crowding was strongly positive this week, reaching the 97th percentile over the trailing twelve months and 96th since inception. This was driven by the long book, indicating that investors had an appetite for buying popular hedge fund longs.

International Extreme Movers Portfolio Exposures

• Industrials increased its allocation in the International portfolio to become the heaviest weighted sector at 7%. This places the sector in the 72nd percentile over the trailing twelve month period and 82nd since inception. This allocation was driven by Machinery (5%) on an industry level and Sweden and Japan were the leading countries in the sector at 6% and 5% respectively.
• Consumer Discretionary was second with its exposure holding steady at 6%. Specialty Retail (3%) and Textiles, Apparel & Luxury Goods (3%) were the highest weighted industries and Germany (2%) was the highest weighted country in the sector.
• Utilities dropped to -7% of the portfolio and was the least represented sector. This is a notably low allocation for the portfolio and placed in the bottom decile both TTM and ITD. Much of the negative allocation is explained by Electric Utilities (-8%) from an industry perspective, and by Brazil (-5%) from a country perspective.

• Quality was in favor, led by Profitability as both Barra and Axioma showed allocations in the 95th percentile for the trailing-twelve-months. Both factors were driven by the short book, suggesting that investors avoided unprofitable names this week.
• Beta was moderately in favor, while Volatility saw mixed results this week. Barra’s Beta factor saw the highest exposure, reaching the 90th percentile for the TTM period. This was driven by the long book, as investors favored buying high-beta names.
• Value was out of favor this week, with Axioma’s Value factor in particular reaching just the 1st percentile for the trailing twelve months and the 10th percentile since inception. The negative allocation was mainly driven by the short book. Barra’s Dividend Yield factor was also notably low, and was driven by the long book, as investors bought low-dividend-yielding names.

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.

• Developed Markets were favored this week with a 22% allocation. This was in the 74th percentile for the trailing twelve months and 77th since inception. In contrast, Emerging Markets saw a -23% allocation, ranking in just the 16th percentile for the trailing twelve months and since inception.
• Within Developed Markets, the Pacific region had the highest allocation. This was mainly due to Japan’s 14% allocation, which ranked in the 76th percentile over the trailing twelve months. Europe and the Middle East was the next highest region with allocations to Sweden and Germany both ranking above the 90th percentile.
• In Emerging Markets, Asia and the Americas both had a -14% allocation. This was a much lower allocation historically for the Americas region. Brazil stood out within the Americas at -18%, its lowest allocation over the trailing twelve months. In Asia, Korea also experienced it’s lowest allocation over the trailing twelve months at -23%.

Regards,

Jose