Trade Tariff Concerns Weigh on Markets

Market Summary

US Market: 2/14/2025 - 2/20/2025

• U.S. headline indices saw mixed performances this week. The Nasdaq led with a modest 0.08% gain, followed by the S&P 500, which edged up 0.04%. The Dow experienced the biggest decline, dropping 1.20% over the last five trading days.
• Concerns over the economic impact of trade tariffs pushed U.S. stocks down from their all-time highs. Meanwhile, gold continued its strong performance, reaching a new record high amid market uncertainty.
• Internationally, speculation that the Bank of Japan may raise interest rates sooner than expected strengthened the yen beyond 150 per dollar. Meanwhile, China’s tech giant Lenovo exceeded expectations, reporting a 20% revenue increase to $18.8 billion in sales.

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 delivered a 19.7% return this week, ranking in the 86th percentile for trailing twelve months and the 87th percentile since inception. This level of performance classifies the week as “Very Volatile”.
• Factors accounted for 12.4% of the total return this week, placing the portfolio in the “Very Alpha-Driven” category. This ranks in the 10th percentile for the trailing twelve months and the 11th percentile since inception.
• Weeks classified as both “Very Volatile” and “Very Alpha-Driven” present valuable opportunities for fundamental investors, as a significant portion of returns is driven by idiosyncratic factors rather than systematic market factors.

International Extreme Movers Volatility and Factor-Driven Speedometers

• The International Extreme Movers portfolio gained 19.7% this week, placing it in the "Very Volatile" category. This return ranks in the 96th percentile for the trailing twelve months and the 86th percentile since inception.
• Factors accounted for 17.3% of the total return, classifying it in the "Very Alpha-Driven" category. This level of factor return ranks in the 8th percentile for the trailing twelve months and the 9th percentile since inception.

US Extreme Movers Portfolio Exposures

• Consumer Discretionary led the US Portfolio this week with a 6% allocation that placed in the 78th percentile over the trailing twelve months and 71st percentile since inception. Automobiles and Textiles, Apparel & Luxury Goods drove much of the sector, though all industries were positive except Specialty Retail at -7%.
• Health Care bounced back from last week’s severely negative position to a positive 1% allocation. This landed in the 68th percentile TTM, but was near the median since inception. Biotech drove the positive allocation at 3%, while Pharmaceuticals and Life Sciences Tools & Services both remained negative at -1% each.
• Industrials was the bottom sector this week with a -13% allocation that fell into the bottom decile both TTM and ITD. Almost half of this exposure was driven by Professional Services at -6%, while Building Products & Aerospace & Defense also contributed significantly at -3% each.

• Beta and Volatility factors were back in favor this week, with all factors ranking above the 65th percentile since inception. Both factors were driven by the long book, as investors leaned into higher-beta and more-risky buys.
• Value factors remained moderately in favor this week while Growth turned negative, with both Growth factors landing in the bottom quartile TTM. The tilt away from Growth was driven by both the long and short books, as investors bought low-growth stocks while also selling higher-growth names.
• Quality factors were noticeably in negative this week with Profitability and Earnings Quality factors ranking in the bottom quintile both TTM and ITD. All three factors were primarily driven by the long book, as investors flocked to lower-quality names.
• Short Interest was strongly positive this week, with its exposure reaching the 99th percentile TTM and 98th percentile since inception. This came as investors bought popular-shorts on the long side, particularly within Consumer Discretionary and Tech.

International Extreme Movers Portfolio Exposures

• Industrials was the top allocation for the International portfolio this week, placing the sector in the 87th percentile for the trailing twelve months and 92nd since inception. Aerospace & Defense along with Electrical Equipment were the main drivers at -4.6% each.
• Information Technology was not far behind with a 7% allocation that placed in the 73rd percentile TTM and 76th percentile ITD this week. Semiconductors & Semiconductor Equipment was the standout industry at 8%, though IT Services and Communications Equipment saw negative allocations of 1.7% and 1.2% respectively.
• Energy was the bottom sector this week, with a -7% allocation, landing in just the 12th percentile TTM and 16th percentile since inception. Oil, Gas & Consumable Fuels drove the lion’s share of this at -5.8%.

• Beta and Volatility exposures pushed higher this week as international investors’ appetite for risk stayed strong. Both Beta factors placed above the 90th percentile over the trailing twelve months, driven by both the long and short book as investors bought higher-beta names and sold low-beta names.
• Similar to the US portfolio, Quality factors were noticeably negative this week, with Profitability and Earnings Quality ranking in the bottom decile TTM. The Profitability factors were driven mostly by the long book, as investors bought less-profitable names. Earnings Quality, however, was driven by the short book, as investors sold higher-quality names.
• Oil Beta and Interest Rate Beta both remained positive this week, ranking in the 71st and 73rd percentile TTM respectively. Both factors were driven by the long book, as investors bought names that benefit from rising oil prices and rising interest rates.

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 slightly favored this week with a 3% allocation, placing in the 42nd percentile over the trailing twelve months and the 49th percentile since the portfolio’s inception. Emerging Markets had a -3% allocation, landing in the 51st percentile TTM and the 42nd percentile since inception.
• The Europe, Middle East & Africa region droved the EM allocation with a -10% allocation that came largely from South Africa. The region’s allocation placed in just the 10th percentile TTM and 13th percentile ITD. Within Asia, Korea saw a notably positive allocation of 16%, ranking in the top decile both TTM and ITD.
• The Developed Markets, were led by the Pacific, despite negative allocations from both the Americas and Europe & Middle East regions. The positive allocation was driven overwhelmingly by Japan, whose 15% position ranked in the 78th percentile TTM and 77th percentile ITD.

Regards,

Jose