Seasons Greetings & Top 5 Most Read Factor Spotlights of 2018
Thank you for your trust and support as we make new strides at Omega Point. We are so grateful to have you alongside us as we continue to implement our shared vision for next generation investment management.
As we say a much-needed goodbye to the tumultuous markets of this past year, I’d also like to thank you for your support and feedback as we continue to evolve Factor Spotlight to provide even more relevant insights into emerging factor trends that may be impacting your portfolios.
With the next issue to be published in January, the entire Omega Point team and I would also like to take this opportunity to wish you a peaceful holiday season and New Year filled with happiness and prosperity.
In this issue we have compiled a list of the top 5 most popular Factor Spotlights of 2018. (#1 should come as no surprise to most of you.)
Now on to this week’s summary and recap.
US Market
This has been one of the toughest weeks we've seen for the US Market Factor (99% correlation to the S&P 500), dropping almost -7%.
Factor Recap
Here's a look at how some key factors we've been tracking have changed in our normalized return indicator. This week's biggest movers have been Growth and Medium-Term Momentum moving into Overbought territory and Market Sensitivity reverting away from the mean.
Top 5 Most Popular Factor Spotlights of 2018.
1. FACTORMAGGEDON 2018?
October 12
Taking a break from our usual focus on a specific factor this week, we'll be sharing our observations on the recent market sell-off from a factor point-of-view. The Nasdaq and Dow are off to their worst start to a fourth-quarter since 2008, and we’re seeing one of the steepest market declines in recent memory. While many pundits are blaming rising interest rates, industrial weakness, and looming trade conflicts, our models show that we can empirically assign a lot of the market's underperformance to an intensifying factor rotation across the well-known 6 style factors.
2. HOW TO GET DEFENSIVE WITH YOUR PORTFOLIO
October 24, 2018
Last week, we discussed how much the market's recent drawdown was driven by a factor rotation away from the cyclical factors (Volatility, Market Sensitivity, & Momentum) and into the more defensive factors of Size, Value, & Profitability. Though we've seen a market bounceback in the past week, movements continue to be heavily correlated with the factor rotation, as shown below.
3. CHARACTERISTICS OF THE RECENT SELLOFF
October 28, 2018
Over the past couple of weeks, we've discussed the factor rotation we observed during the initial market selloff, and how you can create a defensive basket of ETFs to maximize exposure to the defensive factors (Value, Profitability) and minimize exposure to the cyclical factors (Volatility, Market Sensitivity).
4. FACTOR SPOTLIGHT: MOMENTUM UPDATE
September 7, 2018
I hope you've been having a great summer. While factor movement has been relatively quiet this season, we're now seeing the emergence of signal for Medium-Term Momentum factor in both the US and Global models. Usually, when we see this type of movement in both models, it makes for a much stronger signal.
5. SIZE FACTOR IS EXTREMELY OVERSOLD
March 23, 2018
Continuing with our Factor Spotlight series, I wanted to highlight Size as another factor currently sending a strong signal in our Factor Profile.
Happy holidays from all of us at Omega Point!
Omer
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Many of our community members manage global funds or have focused Developed and/or Emerging Market strategies. As you analyze your 2023 strategy performance, we hope that the below will help you quantify the market environment of 2023 and answer questions such as: In comparison to prior years, was 2023 more of alpha or factor-driven year? Which factor characteristics (sector, fundamental, macro, etc..) were associated with positive and negative market moves in 2023? Which factor characteristics had standout positive or negative performance, unlike prior years?
As we enter the new year, we typically find that many of you focus your efforts in the first two weeks of January to conduct a 2023 review of your portfolios in support of your annual investor letters. At Omega Point, we’ve found that we can be potentially supportive of these efforts by helping you quantify the market environment of 2023 and answer questions such as: In comparison to prior years, was 2023 more of alpha or factor-driven year? Which factor characteristics (sector, fundamental, macro, etc..) were associated with positive and negative market moves in 2023? Which factor characteristics had standout positive or negative performance, unlike prior years? Below, you will find a rich set of analytics and a narrative to help you answer the above questions and go deeper as well. Since this analysis is a bit longer than most weeks, we’ve also included a TLDR section so you can get the key highlights quickly and go deeper at your own leisure. We greatly appreciate you being a member of our community and look forward to collaborating with you in 2024.