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U.S. Equities Market Attributes January 2021

ETF Transactions by U.S. Insurers Q3 2020

S&P Latin America Equity Indices Quantitative Analysis Q4 2020

ESG Survey: Making ESG mainstream in Asian portfolios

U.S. Equities Market Attributes December 2020

U.S. Equities Market Attributes January 2021

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Howard Silverblatt

Senior Index Analyst, Product Management

KEY HIGHLIGHTS

U.S. Equities Market Attributes January 2021

MARKET SNAPSHOT

The takeaway for the opening month of the year was the same as the takeaway from December (or to some degree, of post-March 2020)—neither virus nor politics nor any fundamentals shall keep the market from its appointed rounds of new highs. However, the takeaway did not include anything about a one-day return of -2.57% or a 1.93% decline from web-based social trades (which raised questions like, "What's the matter with kids today?" or "Why is my boy just like me?") Now delivering those first-class highs were individual investors, fed by optimism, and a new breed of younger investors, who can no longer hang out spending their money (ah, the humanity of the emptiness of the bars). So, aided by "fun" web-trading toys, they are "stimulating" the market (did someone say to read the FT (Financial Times), not the newspaper, but the programs of the Fed and U.S. Treasury?) I should note that it takes a lot of small investors to move the market, compared to the assets of money managers, with a sidebar (of more seasoned observers) pointing out that the participation of so many new investors speaks well to the size (but not necessarily the profitability) of future investors (at least for those that survive) and their eventual inheritance. While the market went on its merry way, the last week of January saw volatility increase (and VIX® jump from 21 to 37 in one day), leaving the week (and month) "bloody, but unbowed." The S&P 500 posted significant declines those two days, resulting in a 3.31% weekly decline, the worst week since October 2020 (-5.64%), and turning the monthly gain into a decline of 1.11%, leaving the index down 3.66% from its Jan. 25, 2021, closing high.

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ETF Transactions by U.S. Insurers Q3 2020

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Raghu Ramachandran

Head of Insurance Asset Channel

INTRODUCTION

In the volatile first quarter of 2020, U.S. insurance companies invested heavily in Fixed Income ETFs as liquidity dried up in the cash market. In the second quarter, insurers sold off Equity ETFs, but in the third quarter, they returned to buying ETFs, adding over USD 1 billion to their portfolios. While holdings data are not available on a quarterly basis, we were able to analyze ETF transactions. In this analysis, we compare how ETF trading varied between the third quarter and the first half of the year.

ETF TRADES

In the third quarter of 2020, insurance companies traded a little over USD 10.6 billion in ETFs. This is down from USD 24.6 billion in the first quarter and USD 14.0 billion in the second quarter. As in prior quarters, companies traded more toward the end of the quarter (see Exhibits 1 and 2).

Exhibit 2

Exhibit 1

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S&P Latin America Equity Indices Quantitative Analysis Q4 2020

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Michael Orzano

Senior Director, Global Equity Indices

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Silvia Kitchener

Director, Global Equity Indices, Latin America

S&P Latin America Equity Indices Commentary: Q4 2020

Volatility is often the name of the game in Latin America. While 2020 was no exception, global markets also rode the COVID-19 volatility wave. The global pandemic exacerbated uncertainty around the world and all capital markets were affected, particularly during Q1 2020.

The S&P Latin America BMI experienced the greatest loss (-46.0%) among our major regional indices in 01, followed by the S&P MILA Pacific Alliance Composite (-37.5%), which represents Latin America excluding Brazil. Latin American equities rose in Q2, roughly in line with the global recovery, but then they lagged in Q3. Propelled by global economic optimism following the announcements of vaccine developments, the S&P Latin America BMI topped the leaderboard in Q4, gaining more than 30%, but it was not enough to recoup losses from earlier in the year, as the index finished the year down 12.9%. Similar trends were seen across sectors and countries throughout the year. During the first quarter, all sectors and countries dropped, with Energy and Brazil performing worst. During the subsequent quarters, countries and sectors staged a strong recovery, though some fared better than others—a sign that the pandemic affected some countries and sectors more than others. While Q4 saw impressive returns, with Energy generating the best returns (51.2%), it was the Information Technology (49.2% YTD) and Materials (28.3% YTD) sectors that more consistently contributed to positive performance throughout the year. Materials companies, which include exporters of copper and iron, registered record prices for their exports, since January 2013 for copper and October 2011 for Iron.


Among Latin American countries, all flagship indices ended the year under water when measured in USD. The best performers were the S&P/BVL Peru Select 20% Capped, down 0.4%, and Mexico's S&P/BMV IRT, down 1.8%. The story was different for returns in local currencies, given the significant depreciation of most currencies versus the U.S. dollar during the year. The S&P Brazil BMI in BRL (6.43%), Argentina's S&P MERVAL in ARS (22.9%), and the S&P/BVL Peru Select 20% Capped in PEN (8.8%) rounded up the leaders for YTD returns in local currency.


With the pandemic still raging in many parts of the world, what should we expect in 2021? The good news is that there are two vaccines with high efficacy being distributed in several countries. Currently, only citizens from Brazil, Chile, and Mexico have started to get vaccinated, while remaining Latin American countries are on a long waiting list. Economists in the region are watching the slow and fragile recovery. It is summer in the southern hemisphere, which has helped to curb the number of infections and hopefully by the fall and winter of 2021, the vaccine will have helped control the spread. The key now is how quick and effective the rollout of the vaccines will be in Latin America and the rest of the world before the global economy returns to a strong growth trend. It's going to be an interesting year, yet again.



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ESG Survey: Making ESG mainstream in Asian portfolios

While sustainable investment themes and practices are making steady in-roads across the region, the pace would increase with greater asset choice and standardised data, finds the latest AsianInvestor / S&P Dow Jones Indices ESG poll.

The pandemic has proven a time to shine for mandates that invest with ESG principles in mind. Fueled by an accelerated appetite for sustainable funds in Asia, Morningstar data for the third quarter of 2020, for example, showed a record high $8.7 billion of net inflows. This helped total ESG fund assets in Asia to reach $25.1 billion, up 75% from the previous quarter.

Investing through an ESG lens has become more common in line with growing evidence that companies with good characteristics are expected to be more resilient during a crisis. Yet it is easier said than done to find relevant investments, integrate ESG in decision making and evaluate different managers and strategies.

To assess the tangible influence of ESG on portfolios and on potential drivers for future engagement, a new survey by AsianInvestor, in collaboration with S&P Dow Jones Indices (S&P DJI), gathered insights from 85 senior investment executives in October and November 2020.

Key take-aways from these government entities, insurers, pension funds, private banks and other investors – across, Hong Kong, Taiwan, Australia, South Korea, Japan, Singapore, Thailand, Malaysia, Indonesia, the Philippines and India – include:

  • Just over 70% have less than 10% of their current AUM invested in ESGrelated mandates
  • Amid the pandemic, 49% of investors have either already increased their exposure to ESG funds, or plan to – however, 46% of respondents said Covid-19 has made no difference to their ESG-related exposure
  • The two key drivers to invest based on ESG factors are to improve returns and add longer-term portfolio resilience
  • Environmental themes will see the biggest inflows in 2021 – especially clean energy and lower carbon emissions
  • More standardised ESG data would have the biggest impact in encouraging investors to boost their ESG exposure
  • Traditional metrics remain the preferred approach to assess different ESG funds – notably, the track record of the investment strategy and fund performance over the benchmark

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U.S. Equities Market Attributes December 2020

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Howard Silverblatt

Senior Index Analyst, Product Management

KEY HIGHLIGHTS

U.S. Equities Market Attributes December 2020

MARKET SNAPSHOT

My personal commentary is based oncrunching thenumbers, connecting the dots, making some observations, and presenting some possible future scenarios, hopefully based on the statistics, but as Mark Twain said, There are three kinds of lies:lies, damned lies, and statistics.I’ll leave predicting the COVID-19spread, treatment, consumer and business reaction, andpoliticalimpact to others, but the statisticsas I’ve seen them over more than43 years at S&P DJIsay we are paying a lot for expected earningseven if we get the earnings we expect. Specifically, 2021 is projected (consensus operating estimates) to post a record year, as treatment fully overtakes spread and closures, with the forward P/E at23andthe trailing 12-month P/E at30. Even if we get those record earningsan expected 23 over a year awayjustifying that much of a premium is unprecedented. Maybe the new post-COVID-19economy couldjustify it, and maybe crunching the numbers has made me focus too much on the underlying data, so I leave it to the market to justify and set the level. From the Feb.19, 2020, pre-COVID-19 closing high (3,386.15), the S&P 500 has posted 20 new closing highs (33 YTD, as it closed the year witha high, at 3,756.07; the eighth time since 1928 that a year has ended in a high), closing up 10.92% from the pre-COVID-19highand up 16.26% YTD(18.40% with dividends), after last year’s gain of 28.8% (31.49%). All I can say is, it’s been a heck of a run.


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