Our review of the quantitative “factors” upon which many investment models are built. We dive into which factors are performing and which are not. We track the most relevant: Dispersion, Dividends, Estimate Revisions, Growth, Leverage, Momentum, Quality, Sentiment, Share Buybacks, Short Interest, Size, Technicals, Value, and Volatility.
FACTOR WATCH FOR SEPTEMBER 27, 2020
- The week ended September 25, 2020 saw the S&P 500 decline by -0.58%; the index is now down -5.63% month-to-date, and up +2.13% YTD. Our long/short fund-FlowPoint Capital Partners, LP is up +1.7% MTD and +17.4% YTD.
- Sector-wise for the week, U.S. casino, natural gas, cloud computing and IPO-tracking ETFs led all global sectors. Energy fell -8.5% for the week, and financials and materials also declined more than -4%. Financials suffered from several scandalous headlines including JP Morgan’s $1 billion fine for manipulating U.S. Treasury and metals markets, and a report by the International Consortium of Investigative Journalists identifying more than $2 trillion in money-laundering on behalf of cartels, oligarchs and other nogoodniks by JPM, Deutsche Bank, HSBC, BNY Mellon and others.
- Notably, copper futures broke out to new recovery highs, and at $297, “Dr. Copper” — a notoriously leading cyclical indicator to which savvy market participants have awarded it a euphemistic PhD in economics — is now 4% higher than pre-Covid levels and up +6.3% YTD.
- Factor-wise, the best-performing factors for the week in the U.S. were Profitability, EPS revisions, Size and Sales Growth. However, these are not leading factors YTD or in the last 12 months. That title belongs to Volatility, Revenue Estimate Dispersion, and EPS Growth. That fact has been a challenge to investors — the best-performing stocks have been the fastest-growing, most volatile ones with widely diverging estimates, i.e., the knife fights.
- We again emphasize how poorly Share Buybacks are this year as a factor for stocks. The “Buyback Kings” — the 50 members of the S&P 500 members with the largest buybacks — is now down -40% YTD.
- Our FlowPoint Work From Home Index (WFH) rose +3.02% on the week while the FlowPoint Reopening Index fell -1.86%. We monitor this relationship for a potential pro-cyclical market message.