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U.S. Equities Market Attributes April 2023

S&P Kensho New Economies Commentary: Q1 2023

iBoxx Tadawul SAR Government Sukuk Indices – Q1 2023

iBoxx Asian Local Currency Indices Monthly Commentary: March 2023

iBoxx USD Asia Ex-Japan Monthly Commentary: March 2023

U.S. Equities Market Attributes April 2023

Contributor Image
Howard Silverblatt

Senior Index Analyst, Product Management

S&P Dow Jones Indices

Key Highlights


- The S&P 500® was up 1.46% in April, bringing its YTD return to 8.59%.
- The Dow Jones Industrial Average® rose 2.48% for the month and was up 2.87% YTD.
- The S&P MidCap 400® decreased 0.87% for the month, bringing its YTD return to 2.47%.
- The S&P SmallCap 600® was down 2.87% in April and had a YTD return of -0.81%.

U.S. Equities April 2023: Exhibit 1

Market Snapshot

Battle lines were drawn in April.  No, not Biden versus Trump, DeSantis versus Disney, Default versus Debt Ceiling, First Republic Bank (-75% for April and -97% YTD) versus its Depositors, or even Pro-Life versus Pro-Choice, but the market battle: Recession versus Pull Back.  A slowing economy with continued high inflation (cost-push) led to acceptable corporate earnings, which beat expectations (thanks to recent downgrades in the estimates), as strong employment countered the continuing flow of layoffs, which, when measured against employment levels (and increases over the past few years), seemed numerous in announcements but minor in numbers (cutbacks).  The bottom line for April was a battle for the black, with the result for the S&P 500 being a 1.46% April gain, after a rebounding March return of 3.51%, bringing the index up 8.59% YTD.  The market embraced what it expects to be the U.S. Federal Reserve’s last hurrah of interest rate increases (at least for this cycle—come back in a decade, or less), with futures pointing to an 85% chance of a 0.25% interest rate increase at the May 2-3 meeting.  At this point, most see a stop (not even a pause) after that, with the speculation turning to when the first interest rate cut will occur (not that anyone believes the FOMC’s “far off” dot-plot estimate of 2024).  While the Fed may be done with increases, the next drama test will be the debt ceiling and spending level debate, with the “X” date a product of game theory (with this one having nothing to do with the official optimal decision-making theory, but a function of the Treasury’s “adjustments” and “definitions”).  At this point, few expect a default or government closure, with the public political battle expected to be dragged on to within a week or so of the “X” date.  The result, however, will set government spending and affect credits and taxes, and therefore corporate profits, with some winners and some losers.

Volatility significantly decreased for April, as the S&P 500 posted a 1.46% gain (after trading in the red for most of the month) on positive breadth (266 up, with 102 up at least 5%, compared to 235 down with 89 down at least 5%), as it was up 8.59% YTD, on positive breadth (291 up with 136 up at least 10% and 212 down, with 76 down at least 10%).  Eight of the eleven sectors were positive for the month (Communication Services did the best, up 3.56% and Industrials the worst, down 1.22%), as seven were up YTD (Communication Services at 24.46%, Financials at -3.21%).  The average daily high/low spread declined to 0.92% from last month’s 1.51%, and 7 of the 19 days had an intraday high/low spread of at least 1%, compared to 11 last month, as trading declined 24% for the month.

The S&P 500 closed at 4,169.48, up 1.46% (1.56% with dividends) from last month's close of 4,109.31, when it was up 3.51% (3.67%) from the prior month's close of 3,970.15 (-2.61%,
-2.44%).  For the three-month period, the index was up 2.28% (2.72%), as the YTD period was up 8.59% (9.17%) and the one-year return turned positive, up 0.91% (2.66%).  The Dow ended the month at 34,098.16, up 2.48% (2.57% with dividends) from last month's close of 33,274.15, when it was up 1.89% (2.08%) from the prior month's close of 33,656.70 (-4.19%, -3.94%).  The Dow was down 7.34% from its Jan. 4, 2022, closing high (of 36,799.65).  The YTD period was up 2.87% (3.53%), the one-year return was 3.40% (5.64%) and the 2022 return was
-8.78% (-6.86%).

S&P Kensho New Economies Commentary: Q1 2023

The S&P Kensho New Economy Indices seek to track the industries and innovation of the Fourth Industrial Revolution

U.S. equities posted positive returns across the market cap spectrum in Q1 2023, with the S&P Composite 1500® up 7.2%.  The rise, however, was bumpy as investors navigated the banking-related crunch and its aftermath, with the biggest U.S. bank default since 2008, which also briefly spread to Europe.  A pattern of reversals from last year was well underway during the first two months of the quarter, when Communication Services and Consumer Discretionary were the top performers within the S&P 500®, while the Energy and Health Care sectors were the laggards.  After the U.S. banking hiccup in March, the Financials sector (-5.6%) became the biggest quarterly underperformer, while Information Technology (up 22%) and Communication Services (up 20.5%) took the top spots.  Recent returns of the Financials sector have diverged materially from their pattern of moving closely with the 10-year Treasury yields.  Weakness in U.S. regional banks also flowed through into the underperformance of the U.S. small-cap space, reflected in the sharp fall in the S&P SmallCap 600 versus S&P 500 Information Technology performance in March.  Secular growth outperformance and defensive sectors’ underperformance was in line with the performance of S&P 500 factors—high beta and growth took the top spots, while high dividend, pure value and low volatility were near the bottom of the table.  Of the 25 Kensho subsectors, 22 were higher this quarter, the first time since the highs posted in Q1 2021.  Most non-U.S. equity markets were also up this quarter—eurozone equities (up 10.5%) markedly outperformed U.S. equities, while emerging market equities posted relatively modest gains (up 2.3%).

The U.S. Fed’s tightening path was well anticipated by the markets at the beginning of the year, with expectations for the terminal overnight rate at one point hitting nearly 5.7%.  Continued pressure from sustained inflation and overall labor market strength were weighing on the Fed, until the crisis from Silicon Valley Bank (SVB) erupted.  As the contagion spread, the rates market immediately repriced the Fed rate hike path lower for the year.  U.S. Treasuries attracted significant inflows this quarter and posted one the best quarterly returns (3%) in nearly three years.  However, tighter financial conditions in the aftermath of the SVB collapse have seen high yield, and other higher risk segments of the debt markets show weakness.  The U.K. and European Central Banks stayed on course with the U.S. in terms of rate hikes during Q1.  The U.S. dollar, nonetheless, weakened across most of its heavily traded crosses this quarter, as expectations around a pause in the Fed’s rate hikes increased.  Gold also benefited from the rate repricing and bank credit concerns, surging above USD 2,000 to near-historic levels.  Oil prices stabilized this quarter after a downtrend over the previous two quarters, but it started to move higher after OPEC announced surprise oil cuts at the start of April.  Elevated U.S. sovereign CDS spreads continue to reflect the market unease around a potential deal before hitting the U.S. government debt ceiling X date sometime in the second half of the year.

Top Three from across the New Economies

Distributed Ledger (66.7%): KLEDGER posted its best quarterly performance since its inception in late 2018, climbing back up to September2022 levels.  Unsurprisingly, this quarter’s gains closely tracked the rise in the price of Bitcoin (up 71%).  The U.S. regional banking crisis around mid-March prompted renewed interest in currency alternatives like crypto and gold assets.  Almost all of the index constituents posted positive quarterly returns with the exceptions of Turkish firm Turkcell (-10%) and Financials firm ING Groep (-2%).  5 of the 12 constituents, primarily involved with the crypto mining space, posted triple-digit quarterly returns, with the top spots taken by Riot Platforms (up 195%) and Marathon Digital (up 156%).  The index continues to be dominated by the Application Software sub-industry (up 55%), followed by Financials sector firms (up 30%).  It also remains the most volatile across the Kensho subsectors due to a high beta to the crypto markets from its exposure to crypto mining companies.

Virtual Reality (27.2%): KVR’s best quarterly performance in two years was supported by positive contributions from nearly all of its constituents (17 out of 19).  The Semiconductors industry played an integral part in KVR’s recovery this quarter as the index neared its one-year peak.  NVIDIA was the top performer within the index (up 90%), doubling its price over the six-month period and becoming the best YTD performer among the S&P 500 constituents.  Investor sentiment toward NVIDIA likely took a hit from the downturn in crypto assets in 2022, but there has been widespread optimism around the company’s recent push toward creating products geared toward AI applications.  Meta, the second-best YTD performer (up 76%) within the S&P 500, was another top contributor to KVR’s performance.  Meta has also been on a comeback track, returning closer to its one-year peak on the back of strong Q4 2022 earnings reports and a focus on further incorporating AI-powered tools within their apps.  Faro was the notable underperformer (-16%) within KVR, as it slid close to its lowest level in over five years.  This imaging devices and computer-aided measurement firm posted lackluster Q2 2022 results and has been on a downward trend since reaching its peak in early 2021.  

iBoxx Tadawul SAR Government Sukuk Indices – Q1 2023

iBoxx Tadawul SAR Government Sukuk Index

The iBoxx Tadawul SAR Government Sukuk Index total return level rose in the first quarter of 2023, recovering from sharp declines seen in the last quarter of 2022.  The index’s overall duration rose quarter-over-quarter, even as it came down between January and March 2023.  Annual yield for the index fell in sympathy with the wider bond market, which has been seeing a declining trend, especially on the longer end of the curve (see Exhibits 5 and 11 for the sukuk and bond index).  No new bonds were added to the index, but one departed, leading to a slight dip in the total number of constituents, to 52 instruments.  The sukuk and bond index saw constituents fall by three, to 59 instruments, at the March month-end rebalance.

iBoxx Tadawul SAR Government Sukuk Indices: Exhibit 1

iBoxx Tadawul SAR Government Sukuk Indices: Exhibit 2

iBoxx Tadawul SAR Government Sukuk Indices: Exhibit 3

iBoxx Asian Local Currency Indices Monthly Commentary: March 2023

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Kangwei Yang

Director, Fixed Income Indices

S&P Dow Jones Indices

Monthly performance, maturity, yield and duration of the iBoxx ALBI, iBoxx ABF and iBoxx SGD Indices.

The banking sector dominated headlines over the past few weeks after the dramatic collapse of Credit Suisse and two regional U.S. banks: Silicon Valley Bank and Signature Bank.  Fear of the issues becoming more widespread caused some volatility in the markets, but market analysts suggested the events were idiosyncratic rather than systemic.

Some investors in Singapore would also have felt the heat in the write-down of Credit Suisse Contingent Convertible (CoCo) bonds, which included an SGD 750 million bond issued in June 2019 with a 5.63% coupon.  On a positive note, the Monetary Authority of Singapore (MAS) reaffirmed the financial hierarchy of payout for distressed banks, such that equity shareholders would continue to absorb losses ahead of additional tier 1 and tier 2 bond holders.

Against the backdrop of bank stress, the U.S. Federal Reserve raised interest rates by a conservative 25 bps in the latest move to quash inflation with “more dovish tones” according to some observers.

At the end of an extraordinary month, the S&P 500® inched up by 3.51%.  U.S. Treasuries—represented by the iBoxx $ Treasuries—were also in the black, up 3.1%.  Despite woes in some major banks, confidence in the sector remained seemingly strong among investors, as both the iBoxx $ Financials (up 1.47%) and iBoxx $ Banks (up 1.52%) managed to post positive returns in March.

Exhibit 1: iBoxx ALBI Overall and Single Market Returns

It was a good month for all local markets in the iBoxx Asian Local Bond Index (ALBI).  The overall index (unhedged in USD) was up 3.21% in March; capital gains and appreciation of most local currencies against the U.S. dollar contributed to the positive performance.

In local currency terms, South Korea (up 3.06%), Hong Kong (up 2.88%) and Singapore (up 2.86%) led the gains.  China off- and onshore bonds were among the poorest performers, returning 0.50% and 0.61%, respectively, but both markets still managed gains in a decent month for fixed income, despite woes in banking-related additional tier 1 (AT1) bonds.

The largest gains were concentrated at the long end of the curve, with Hong Kong 10+ (up 6.58%), Singapore 10+ (up 5.32%) and South Korea 10+ (up 4.70%) leading the pack.  Besides the top-performing segments, it was also a sea of green across maturity buckets for all eligible markets.

As of the end of March, the overall index yield declined 22 bps to 3.95%, while yields for all local markets declined.  India remained the highest-yielding bond market in the index, offering 7.45%, while Thailand (2.97%) remained the lowest-yielding market.

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iBoxx USD Asia Ex-Japan Monthly Commentary: March 2023

Contributor Image
Randolf Tantzscher

Managing Director, Head of APAC Fixed Income Product Management

S&P Dow Jones Indices

March 2023 Commentary

The banking sector dominated headlines over the past few weeks after the dramatic collapse of Credit Suisse and two regional U.S. banks: Silicon Valley Bank and Signature Bank.  Fear of the issues becoming more widespread caused some volatility in the markets, but market analysts suggested the events were idiosyncratic rather than systemic.

Some investors in Singapore would also have felt the heat in the write-down of Credit Suisse Contingent Convertible (CoCo) bonds, which included an SGD 750 million bond issued in June 2019 with a 5.63% coupon.  On a positive note, the Monetary Authority of Singapore (MAS) reaffirmed the financial hierarchy of payout for distressed banks, such that equity shareholders would continue to absorb losses ahead of additional tier 1 and tier 2 bond holders.

Against the backdrop of bank stress, the U.S. Federal Reserve raised interest rates by a conservative 25 bps in the latest move to quash inflation with “more dovish tones” according to some observers.

At the end of an extraordinary month, the S&P 500® inched up by 3.51%.  U.S. Treasuries—represented by the iBoxx $ Treasuries—were also in the black, up 3.1%.  Despite woes in some major banks, confidence in the sector remained seemingly strong among investors as both the iBoxx $ Financials (up 1.47%) and iBoxx $ Banks (up 1.52%) managed to post positive returns in March.

 

As shown in Exhibit 1, the iBoxx USD Asia ex-Japan recovered most of its February losses, gaining 1.18% in March.  The gains were driven by strong performance in investment grade bonds.  The index yield contracted 23 bps to 5.93%, while spreads widened by a similar amount to 219 bps.

Exhibit 1: Recent and Long-Term Index Performance

Investment grade bonds had a positive March, advancing 1.77% with gains across all rating and maturity ranges.  In contrast, the high yield segment posted losses across most maturity and rating segments.  CCC rated bonds in particular lost more than 8%, with double-digit losses in the 3+ maturity range.

Exhibit 2: Rating and Maturity Month-to-Date Index Performance

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