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August in Review

September 15, 2021    Jordi Visser

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Despite growing fears about the delta variant and a slowdown in economic data, stocks moved higher with the SPX finishing positive for the 7th consecutive month. Following July’s higher volatility, the VIX resumed a downward trend.  At the same time, 10-year rates had their first monthly rise since March. Increased restrictions in Asia had a marked impact as a result of downstream effects, including driving down the ASEAN manufacturing PMI to levels similar to those seen in June of 2020. Not surprisingly, it spooked the rest of the world. The G10 Citi Surprise Index had its largest monthly drop since April 2020, which had marked the worst economic period of the pandemic. Under the hood in the equity markets, the news in Asia led investors to further bolster defensive positions. The Size Factor was up for the 5th month in a row and had its largest monthly performance since March 2020, when the SPX was down 12.51%. In addition, the Quality Factor also had its largest positive move since March 2020.

One of the ways we measure long alpha dispersion is the percent of names within the S&P 1500 Index that outperform the mean. This percentage continued to decline and reached the lows witnessed during March 2020, matching the factor moves within the month. Weiss PMs continue to believe that once fears over covid subside, fundamentals will drive price movement rather than broad risk reduction which has dominated price movement since February when the fears over growth began.

For more of Jordi's views on the market, including those on the current Asian recession and how to position portfolios for 2022, check out his latest video.

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