January 2023 Monthly Review

Jordi Visser

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The change in the calendar year led to changes in the markets. After a brutal year for stocks and bonds, the move to 2023 led to strong stock gains in January. After a challenging December, the SPX made up some of the losses and was up 6.18%. This marked the 3rd monthly gain of the last four. Beta was also strong, with the Russell 2000 small-cap index up nearly 10% for the month. The consumer discretionary, technology, communication services, and real estate sectors led the way for the month. These were the four worst-performing sectors in 2022. Therefore, much of January’s moves seemed to be short covering driven by declining rates. 10yr rates were down 37 bps, and, more importantly, 2yr rates saw their largest monthly decline since 2020. This move lower caused the largest drop in rates vol since early 2020. Credit was strong for the month, with IG up 5%. Mean reversion in assets had a large impact on factors as pure momentum had its largest monthly drop since April 2009, coming out of the GFC. Meanwhile, beta outperformed profitability for its best monthly performance since the summer. Value outperformed growth for the 4th month in a row.

One of the most important signs for the month was the re-leveraging of hedge funds. We expect this to be a theme throughout the year. The two proxy indicators for re-leveraging were both up this month. The first is beta outperforming profitability or quality. The second is the GS VIP hedge fund index outperforming the SPX. Further, the GS VIP index outperformed the SPX by the largest amount in a month since Feb 2021, which was just after the GameStop event that triggered the deleveraging seen across long-short equity funds over the last two years. Although fears over inflation and rate hikes are likely to pop up from time to time, we expect vol to remain lower than it was in 2022. Further, we expect investors to focus on underlying fundamentals again, which leaves strong opportunities for 2023.

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Important disclosures: Disclosures: This content (the "Insights Page") is provided by Weiss Multi-Strategy Advisers LLC ("Weiss"). The views expressed on the Insights Page are for informational purposes only and are subject to change without notice. Information on the Insights Page has been developed internally and is based on market conditions as of the date of the original post on the Insights Page from sources believed to be reliable. Nothing on the Insights Page should be construed as investment, legal, tax, or other advice and should not be viewed as a recommendation to buy or sell any security or adopt any investment strategy. Past performance is no guarantee of future results. Please consult your own advisers regarding business, legal, tax, or other matters concerning investments. Weiss has no control over information at any external site hyperlinked on the Insights Page. Weiss makes no representation concerning and is not responsible for the quality, content, nature, or reliability of any hyperlinked site and has included hyperlinks only as a convenience. The inclusion of any external hyperlink does not imply any endorsement or ongoing monitoring by Weiss of any hyperlinked site. Investing in securities is speculative and involves substantial risk of loss.

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Important disclosures: Disclosures: This content (the "Insights Page") is provided by Weiss Multi-Strategy Advisers LLC ("Weiss"). The views expressed on the Insights Page are for informational purposes only and are subject to change without notice. Information on the Insights Page has been developed internally and is based on market conditions as of the date of the original post on the Insights Page from sources believed to be reliable. Nothing on the Insights Page should be construed as investment, legal, tax, or other advice and should not be viewed as a recommendation to buy or sell any security or adopt any investment strategy. Past performance is no guarantee of future results. Please consult your own advisers regarding business, legal, tax, or other matters concerning investments. Weiss has no control over information at any external site hyperlinked on the Insights Page. Weiss makes no representation concerning and is not responsible for the quality, content, nature, or reliability of any hyperlinked site and has included hyperlinks only as a convenience. The inclusion of any external hyperlink does not imply any endorsement or ongoing monitoring by Weiss of any hyperlinked site. Investing in securities is speculative and involves substantial risk of loss.

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