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U.S. Equities Market Attributes December 2022

The Growth of Islamic Index-Based Strategies

iBoxx USD Asia Ex-Japan Monthly Commentary: November 2022

iBoxx SGD Monthly Commentary: November 2022

iBoxx ALBI Monthly Commentary: November 2022

U.S. Equities Market Attributes December 2022

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Howard Silverblatt

Senior Index Analyst, Product Management

Key Highlights


- The S&P 500® was off 5.90% in December, bringing its 2022 return to -19.44%.
- The Dow Jones Industrial Average® lost 4.17% for the month and was down 8.78% for 2022.
- The S&P MidCap 400® dropped 5.72% for the month, bringing its 2022 return to -14.48%.
- The S&P SmallCap 600® was down 6.89% in December and had a 2022 return of -17.42%.

U.S. Equities December 2022: Exhibit 1

Market Snapshot

For the S&P 500, 2022 was a difficult year, as the index was down 19.44%—its worst year since 2008's -38.49%. Energy was the only positive sector for the year, up 59.05%, while notably, Utilities was up 1.57% including dividends—I'm a dividend guy. Overall for the index, 139 issues gained (average 22.21%) and 363 were down (average -24.58%; for all issues, the average was -11.62%), again the worst since 2008, when only 25 issues were up (Family Dollar Stores was best, up 35.57%). Volatility was significantly higher, as 219 of the 251 trading days had at least a 1% intraday high/low spread, compared with 2021's 95, with 122 days moving at least 1% (59 up, 63 down), compared with 2021's 55 (34 up and 21 down). The intraday high/low spread for 2022 was 1.84% (the highest since 2009's 2.03%, as 2008 was 2.81%), compared with 2021's 0.97% (2019 was 0.85% and 2017 was a passive 0.51%— the lowest since 1962, when my data starts). On an aggregate basis, the S&P 500 lost USD 8.22 trillion (finishing the year at USD 32.215 trillion), with Information Technology down USD 3.49 trillion and Energy up USD 0.589 trillion.

While this year's market stats were bad, they do come after a three-year run-up of 90.13% (2021: 26.87%; 2020: 16.24%; 2019: 28.88%) and a five-year run of 112.89% (2018: -6.24%; 2017: 19.42%). The COVID-19 decline from Feb. 19, 2020 (a closing high at the time), to March 23, 2020, took the market down 33.93%, but it has recovered 71.61% from that March 2020 low and was up 13.39% from the pre-COVID-19 (impact) Feb. 19, 2020, level. The market is long term, and if that is your approach, 2022 must be interpreted via its highs, lows, events and history.

As for the January barometer of "so goes January, so goes the year," it has been correct 71.28% of the time since 1929, and it worked in 2022: January was down, at -5.26%, as was the year, at -19.44%. The first day indicator is a coin-toss, correct 50% of the time; it did not work in 2022, as the first day ended on a closing high (4,796.56, up 0.64% for the day) and was the highest close of the year.

The S&P 500 ended the year without Santa or any benevolent being showing up (although there was that 9.11% July run; should have realized when it was “911”). The index posted a 5.90% decline for December, after an uplifting 5.38% in November and 8.80% in October, which left Q4 2022 up 7.08%—the best three-month period of the year (September was -9.34% and August -4.24%). Unfortunately, 7.08% was nowhere near the level needed to compensate for the loss of 24.77% for the first nine months of the year, leaving 2022 down 19.44%, compared with 2021's gain of 26.89 (up 2.36% for the two-year period). For December, all 11 sectors declined, as Utilities did the best, limiting its decline to 0.77%, while Consumer Discretionary did the worst, falling 11.31% for the month.

For 2022, Energy was the only positive sector, up 59.04%, while Communication Services was the worst sector, down 40.42%; Information Technology was down 28.91% for 2022 and accounted for approximately 44% of the index's decline. On an aggregate basis, the S&P 500 decreased USD 2.156 trillion (to USD 32.133 trillion) for the month (up USD 1.736 trillion last month), while it declined USD 8.224 trillion for 2022; it was up USD 4.069 trillion from the Feb. 19, 2020, start of the COVID-19 pandemic.

Layoffs significantly increased, as snack and beverage issue PepsiCo (PEP), investment houses Morgan Stanley (MS) and Goldman Sachs (GS), Bank of America (BAC) and semiconductor maker Micron Technology (MU) all announced layoffs and cost reduction plans (last month included Amazon, Meta and Twitter).

The Growth of Islamic Index-Based Strategies

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Eduardo Olazabal

Senior Analyst, Global Equity Indices

S&P Dow Jones Indices

INTRODUCTION

Islamic indices provide market participants with a comprehensive set of Shariah-compliant benchmarks for equities and sukuk, covering a wide variety of investment themes and strategies. These have been created to support the investment needs of the Islamic investment community and have gained considerable traction over the past years.

REVIEW OF 2022

Landscape of Islamic Funds

Shariah-compliant investment strategies have been offered for many years in an actively managed mutual fund wrapper, with predominance in traditional Islamic markets such as Malaysia and Saudi Arabia. However, index investing has made significant inroads in this category over the past five years. For example, more than one-half of currently available Islamic index funds were launched after 2017. Also, Islamic index funds, unlike their actively managed counterparts, are now available to most investors around the world—in North America, Europe and other Islamic markets in the MENA and Asia Pacific regions.

As of Sept. 30, 2022, there were over USD 4.7 billion in assets tracking Shariah-compliant indices in mutual funds and ETFs. This represents an increase of USD 425 million year-over-year and USD 3.4 billion since 2017. While it is still a relatively small asset base compared with other major categories, this segment ranks among the fastest growing, with an annualized growth of 30% since 2017. Islamic ETFs have been a key part of this trend, with a general proliferation of new products across investment themes and listing regions.

Growth of Islamic ETFs

This year has been exceptional for Islamic ETFs; there were USD 1.5 billion in assets under management tracking Shariah-compliant indices as of Sept. 30, 2022, which represents 13% growth YTD, despite difficult market conditions. Islamic ETF AUM have been supported by the launch of eight new ETFs this year, along with all-time-high inflows of more than USD 500 million.

These recent launches raise the total number of Islamic ETFs to 24, covering a wide set of investment exposures from global, regional and country-specific core to more specialized investment themes such as factors and real estate.

The Growth of Islamic Index-Based Strategies: Exhibit 1

This article was first published in Islamic Finance News’ IFN Guide 2023 on Dec. 20, 2022.

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iBoxx USD Asia Ex-Japan Monthly Commentary: November 2022

November 2022 Commentary

Major stock and bond indices posted a welcome rally in November after months of consecutive declines.  Markets reversed course this month, driven principally by expectations that policymakers would soon lower the pace of future rate increases.

Market sentiment improved broadly in November.  In China, a 20-point playbook of “relaxed” COVID-19 control measures issued by the National Health Commission sparked hopes of an eventual reopening of the country.  The eurozone inflation figure for November eased more than expected, supporting a smaller European Central Bank rate hike in December. In his recent remark at the Brookings Institution, U.S. Federal Reserve Chair Jerome Powell indicated that the time for a slower pace of rate increases may come as soon as the next Federal Open Market Committee (FOMC) meeting.

This month, the U.S. Treasury yields moderated, with the 10-year yields falling below 4.0% to 3.68%, while the U.S. dollar continued to soften, dropping over 5%. This combination of lower bond yields and a weaker dollar acted as a catalyst for the market reversal.

In Asia, U.S. dollar bonds rebounded in November, with the iBoxx USD Asia ex-Japan Index increasing 5.11%, its best monthly performance so far in 2022.  The index yield dropped by 0.9 percentage points to 6.47%, and the index spread tightened by 53 bps to 253 bps.  As shown in Exhibit 1, the overall index and its major subindices all posted positive returns this month.  The China Real Estate Index recorded the largest gain, surging over 30%, while the China LGFV Index registered a comparatively lackluster performance of 0.31%.

iBoxx USD Asia Ex-Japan Monthly Commentary: November 2022: Exhibit 1

This month, positive performance was observed across the maturity buckets in all credit rating curves.  Strong returns were seen in long-dated investment grade (IG) bonds, while significant gains were observed across the curve in the high-yield (HY) category, particularly in maturity buckets with China real estate debt.

iBoxx USD Asia Ex-Japan Monthly Commentary: November 2022: Exhibit 2

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iBoxx SGD Monthly Commentary: November 2022

November 2022 Performance

On a year-over-year basis, the Monetary Authority of Singapore (MAS) Core Consumer Price Index (CPI) eased in October for the first time in eight months and edged lower to its August 2022 level of 5.1%, a decline from the 5.3% in September due to smaller increases in prices of utilities, retail and other goods and services. MAS Core Inflation is expected to average around 4.0% for 2022, up from 0.9% back in 2021.  The Singapore central bank anticipates the effect of the impending Goods and Sales Tax (GST) increase from 7% to 8% starting Jan. 1, 2023, to be transitory and has also forecasted a core inflation figure of 2.5%-3.5% for 2023.

With global inflation showing signs of cooling and the U.S. Federal Reserve signaling a possible slowdown of its aggressive rate hikes, market sentiments were boosted and a relief rally was triggered across asset classes in November.  Singapore was no exception to the relief rally, with the Dow Jones Singapore Index rallying by 6.92% this month and paring back its YTD losses to -12.82%.

The iBoxx SGD Overall gained 1.91% this month, bolstered by a 2.44% gain from Singapore Government Securities (SGS) and a modest 0.98% gain from the non-sovereigns.  This brings the index’s overall YTD losses to 7.04%.

iBoxx SGD Monthly Commentary: November 2022: Exhibit 1

iBoxx SGD Monthly Commentary: November 2022: Exhibit 2

iBoxx ALBI Monthly Commentary: November 2022

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Kangwei Yang

Director, Fixed Income Product Management

S&P Dow Jones Indices

November 2022 Commentary

iBoxx ALBI Monthly Commentary: November 2022: Exhibit 1

Protests against the “Zero-COVID” policy in China dominated the headlines in November, causing global stocks to fall in a knee-jerk reaction in the last week of the month.  Despite some jitters caused by the protests, the S&P 500® posted a gain of 5.38% in November, as the market banked on the possibility of a more accommodative stance from the Federal Reserve.  One of the key economic indicators—the 2s/10s spread of the U.S. Treasury yield curve—continued to widen into the red and has remained in negative territory since July of this year.  This was against the backdrop of somewhat easing inflation numbers and a slightly more dovish tone in the Federal Reserve Chair’s latest speech in late November.

U.S. Treasuries—as represented by the iBoxx $ Treasuries—gained 2.83% in the penultimate month of this year.  In Asian fixed income, the iBoxx Asian Local Bond Index (ALBI) (unhedged in USD) surged 5.47% in the same period as a result of both capital and FX gains (against the U.S. Dollar) in most eligible local markets.

Most local markets recorded gains (in local currency terms) this month, with South Korea (up 3.88%) and Indonesia (up 3.61%) leading the pack.  In fact, half of the eligible markets returned more than 2%.  China Onshore (-0.99%) and China Offshore (-0.12%) were the only markets in the red.

Gains were observed across the yield curve (apart from China On- and Offshore) and the highest gains were concentrated in the long end of the curve.  Returns of the Hong Kong 10+, South Korea 10+ and Thailand 10+ exceeded 5% this month.

From a yield perspective, the overall index yield (in semiannual terms) dipped slightly (-23 bps), offering 4.23% as of Nov. 30, 2022.  Consistent with performance of local markets, only yields of China On-and Offshore rose this month.  India remained the highest-yielding bond market in the index, offering 7.34%, while China Onshore (2.98%) remained the lowest-yielding market.

iBoxx ALBI Monthly Commentary: November 2022: Exhibit 2

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