Tag Archives: 2018

Dec 11, 2018

Getting to Know the S&P/BMV IPC – An Iconic Representation of the Mexican Equity Market

2018 marks the 40th anniversary of the S&P/BMV IPC, launched on Oct. 30, 1978, as part of the Mexican market revolution. Honoring that milestone, we revisited the evolution of the index that has since become an icon of the Mexican equity market.[1] As of Dec. 31, 2017, Mexico had 141 listed domestic companies, with a…

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Nov 21, 2018

Shelter from the Storm

As we approach the final month of a rollercoaster year in the markets, adding a factor lens can provide perspective, especially when it comes to low volatility. The goal of low volatility strategies is to provide investors with protection in falling markets and participation in rising markets. The need for protection has become more relevant…

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Nov 16, 2018

The Virtues of Slow and Steady

For most of 2018, the S&P 500 Low Volatility Index® underperformed its parent S&P 500. Through the first nine months of 2018, the S&P 500 climbed 11% while the S&P 500 Low Volatility Index was up only 6%. Then October came and, in one month of acute volatility, the low volatility index recaptured parity with…

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Oct 17, 2018

Surprising but Explainable

Equal-weight indices have a small-cap tilt. Therefore, one might naturally assume that the volatility of equal-weight indices is higher than that of their cap-weighted counterparts. Surprisingly, this is not always the case, and we can understand why using the lens of dispersion and correlation. Exhibit 1 shows that the volatility of the S&P 500® Equal…

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Oct 15, 2018

Looking Through The Sector Lens

We’ve recently noted that this month’s market turmoil created a radical reversal of factor returns, poking holes in this year’s momentum bubble. A similar trend has occurred within sectors.  During the first nine months of 2018, Consumer Discretionary and Info Tech dominated performance, as seen in Exhibit 1. For the first two weeks of October,…

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Oct 11, 2018

Breaking Down Volatility

“Data! Data! Data!” he cried impatiently. “I can’t make bricks without clay.” – Sherlock Holmes (in “The Adventure of the Copper Beeches”) Despite yesterday’s hand wringing loss for equity markets— the S&P 500 dropped 3.3%—the index is still up 5.8% year to date 2018. Nevertheless, losing in one day a third of what the equity market…

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Oct 11, 2018

Momentum Bubble Deflating?

Yesterday’s decline in the U.S. and global stock markets is striking not simply because of its magnitude but also because it represents a radical reversal of factor returns from the first three quarters of 2018. Readers of our quarterly factor dashboard will recognize this graph, which shows the total return of the S&P 500 and…

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Oct 9, 2018

Housing Slows

Sales of new and existing single-family homes have fallen since their recent high in November 2017 while pending home sales are flat to down so far this year.  Starts of new single-family homes are volatile but also remain below the peak seen at the end of 2017.  Recent press reports of declining activity in several…

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Sep 10, 2018

Performance Trickery

Suppose you, as a hypothetical financial advisor, encounter a hypothetical marketer who presents the following hypothetical performance data: Last Year Trailing 3 Years Trailing 5 Years Trailing 10 Years Portfolio 25.0% 11.9% 16.0% 8.8% Benchmark 21.8% 11.4% 15.8% 8.5% Not only did the portfolio beat its benchmark handily in 2017, says our marketer, but it…

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Aug 23, 2018

Juxtaposition and Paradox

Effective prior to the market open on Sept. 24, 2018, the Telecommunication Services sector will be replaced with a new Communication Services sector, which will combine telecom with parts of the Information Technology and Consumer Discretionary sectors. As a result, Telecom, the ugly duckling sector comprising three stodgy telephone companies, will now be joined by…

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