Post-Election Momentum Fades for US stocks while Bitcoin Soars

Market Summary

US Market: 11/8/2024 - 11/14/2024

• U.S. headline indices delivered mixed performance this week. The Dow Jones Industrial Average led the pack with a modest gain of 0.05% over the past five trading days. Meanwhile, the S&P 500 posted a slight decline of 0.40%, followed by the Nasdaq Composite, which fell 0.84%.
• Momentum from Trump’s victory is has ended rapidly. The S&P 500 has already lost one third of it’s post-election gains, while the Nasdaq 100 is on a four day losing streak as of Friday.
• Trump's pledge to pursue a pro-digital asset policy has propelled Bitcoin to a 30% surge since the presidential election, with investors funneling over $6 billion into cryptocurrency funds.
• On the international stage, China’s retail sales surged at their fastest pace in eight months, while the UK economy slowed more than anticipated.

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 25.7% return this week, placing it in the 96th percentile for the trailing twelve months and the 94th percentile since its inception. This performance categorizes the week as "Very Volatile."
• Factors accounted for 20.6% of the total return pacing in the 38th percentile for both trailing twelve months and since inception. Earning the classification of “Alpha Driven”.
• Weeks that are both highly 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.

International Extreme Movers Volatility and Factor-Driven Speedometers

• The International Extreme Movers portfolio posted a 19.5% return this week, ranking in the 96th percentile on a trailing twelve-month basis and the 85th percentile since inception. This performance categorizes the week as "Very Volatile."
• Factors returns accounted for 25.7% of the total return, landing in the 58th percentile for trailing twelve months and 44th percentile since inception. This level of factor return classifies this week as Neutral.

US Extreme Movers Portfolio Exposures

• Consumer Discretionary was the most represented sector this week with a 12% allocation. This places in the 89th percentile for trailing twelve months and 84th percentile since inception. All industries within this sector contributed positively, with Hotels, Restaurants & Leisure contributing the most at 4%, followed by Textiles, Apparel & Luxury Goods at 3%.
• Consumer Staples was the second most represented sector with a 4% allocation, placing it in the 81st percentile over the trailing twelve months. Half of this positioning was driven by Food Products, which contributed 2%.
• Materials fell to a -15% allocation, placing it in just the 1st percentile over the trailing-twelve-months and the 2nd percentile since inception. Metals & Mining drove -8% of this allocation, while Chemicals drove -7%.

• Growth continued to be in favor this week, with Axioma’s Growth factor reaching the top decile over the trailing-twelve-month period. Both the long and short sides of the portfolio drove this, indicating that US investors bought into high-growth names and sold out of low-growth names.
• Value factors were strongly negative with the Earnings Yield factor across all three models reaching the bottom decile over the trailing-twelve-month period. Dividend Yield factors were also negative across the board - in both cases, the move was driven by the short side of the portfolio. This indicates that investors strongly favored low-dividend yielding and low-earnings yielding names this week.
• Macro factors were both down, with Interest Rates Beta reaching the 31st percentile TTM, and Oil beta reaching the 27th percentile TTM. Oil Beta was driven by both the long and short books, as investors favored stocks that benefit when oil prices are low, and sold stocks that benefit from rising oil prices. Interest Rate Beta positioning was driven primarily by the long book, as investors favored names that benefit from low interest rates.

International Extreme Movers Portfolio Exposures

• Financials remained the most represented sector in the International portfolio this week, with a 10% allocation that placed in the 75th percentile over the trailing twelve months and the 78th percentile since inception. Banks, particularly within Japan, were the main drivers accounting for over 7% of the sector.
• Industrials also held its spot as the second-largest sector, increasing to a 10% allocation that placed in the 90th percentile since inception. Aerospace & Defense led 5% of the total sector allocation, followed by Industrial Conglomerates at 2%.
• Similar to the US portfolio, Materials was at the bottom of the portfolio this week, declining to a -19% position that placed in just the 4th percentile TTM and 5th percentile since inception. Metals & Mining drove the vast majority of this, at -14% percent, but Chemicals were also a significant contributor at -6%.

• Beta factors pushed further negative this week, with Barra and Axioma’s factors both landing in the bottom quartile over the trailing twelve month period. This exposure was primarily driven by the short book, indicating that investors sold positions with high market beta.
• Echoing the US portfolio, Growth was in favor, with Axioma’s Growth factor reaching the 98th percentile TTM and 87th percentile since inception. This was driven equally by the long and short sides of the book, as investors sold low-growth stocks particularly in South Korea, and bought high-growth stocks in China and Australia.
• Interest Rate Beta was strongly positive this week, reaching the 94th percentile TTM, as investors favored names that benefit from rising rates, particularly in Japan, China, and Canada. Oil Beta, on the other hand, was negative and landed in the 32nd percentile over the trailing twelve months. This was driven largely by the short book, as investors sold names that benefit from rising oil prices.
• Short Interest was notably low this week, with the -0.47 exposure placing in the 5th percentile TTM and 6th percentile since inception. Both sides of the book contributed to the negative exposure, though the long side was the main driver.

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 21% allocation that marked the 75th percentile since the portfolio’s inception and the 72nd percentile over the trailing twelve months. In contrast, Emerging Markets had a -22% allocation, positioning it in the 17th percentile for both the trailing-twelve-month and since-inception periods.
• Within Emerging Markets, Asia was the most significant region, driven by the -20% allocation to India and the -15% allocation to Korea. Both countries’ allocations fell into the bottom decile on a TTM and since-inception basis. Despite this, Turkey saw a notably positive allocation of 5% that placed in the 90th percentile TTM.
• In the Developed Markets, the Pacific region saw the highest allocation, led by Japan at 7%. Several countries saw particularly high allocations that ranked in their respective top deciles over the trailing-twelve-months, including Canada, Australia, Singapore, and Italy.

Regards,

Jose