U.S. Equities Market Attributes July 2022

Market Commentary S&P Kensho New Economies Indices Q2 2022

iBoxx Tadawul SAR Government Sukuk Indices – Q2 2022

iBoxx SGD Monthly Commentary: June 2022

S&P Latin America Equity Indices Quantitative Analysis Q2 2022

U.S. Equities Market Attributes July 2022

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Howard Silverblatt

Senior Index Analyst, Product Management

Key Highlights

- The S&P 500® was up 9.11% in July, bringing its YTD return to -13.34%.
- The Dow Jones Industrial Average® gained 6.73% for the month and was down 9.61% YTD.
- The S&P MidCap 400® rose 10.75% for the month, bringing its YTD return to -11.59%.
- The S&P SmallCap 600® was up 9.93% in July and had a YTD return of -11.54%.

U.S. Equities
July 2022 - Exhibit 1

Market Snapshot

Earnings pushed back the bear in July, with the S&P 500 ending the month up 9.11%, its best month since November 2020’s 10.75% gain. Ironically, concern over earnings was what pushed stocks down in June (-8.39%) to kill the bull and secure the bear’s place. Specifically, while earnings for Q2 2022 were expected to increase 13% over Q1, the whisper numbers were much lower, as was the concern over the second-half guidance. However, actual earnings (72.1% reported) did not make the expected 13% gain and now indicate a 7% gain, which is a headline disappointment for some, but not if you were one of those money managers (or traders) who traded into the whisper numbers (and sold). For them, it was an unexpected beat and a time to reallocate, as consumer spending continued (with Q2 sales potentially setting a new record and margins increasing). Similarly, guidance indicated expectations for a weakened Q3 (via inflation, higher interest rates and a strong U.S. dollar) and the word “recession” is now in the eyes of the dictionary after Q2 2022 GDP posted -0.9% and Q1 posted -1.6%. Q4’s guidance (to date) is more general and filled with concerns, but with a tone of “we can get through it” (almost as if it was written by the sell side), as hopes for a 2023 recovery (now including an FOMC interest rate increase) came back to create optimism (and buys). Adding to that new optimism was a new dovish U.S. Fed and Chair Powell (tough now, easy later), even as the Fed stuck to its script, increasing another 0.75% this month. It scripted another increase in September, but teased about the rate, turning to the time-tested phrase “data dependent” for the actual amount. To the Street, the read was a Fed that would (most likely) raise another 0.75% at its Sept. 20-21 meeting, but then pull back with lower increases (at the Nov. 1-2 and Dec. 13-14 meetings), with some speculation (hope is eternal) of a 2023 mid-year reduction. 

Market Commentary S&P Kensho New Economies Indices Q2 2022

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

Global equity markets had a lackluster second quarter this year as they navigated a challenging macro environment. The S&P 500® was down 16% this quarter, posting the worst first-half performance since 1970, with three of its constituent sectors also having their worst first-half performance on record. Other major indices focused on U.S. small-cap equities, global equities and emerging market equities also had multi-year record losses during this first half. The story in the fixed income space was similar, as the Fed's tightening cycle switched into high gear after a 75 bps overnight rate hike in June, the biggest hike since 1994. The speed of rising rates has weighed heavily on the bond and credit markets, as various global and emerging market bond aggregates posted their worst first-half declines on record. The knock-on effects of rising rates, together with soaring inflation, pulled growth equities lower. The Q2 underperformance of the S&P 500 Growth versus the S&P 500 Value (-9.5%) was the worst since 2001, and so was the S&P 500 Growth's underperformance versus the S&P 500 (-4.7%). To round off this broad pullback across various market segments, consumer sentiment also fell sharply due to growing concerns of a recession ahead, despite a strong labor market. This combination of uncertainties, especially around underperforming growth equities and downcast investor expectations that S&P Kensho Indices are particularly sensitive to, was a recipe for a difficult Q2 2022.


Clean Energy (-7.7%): KENERGY, which focuses on clean energy production at a utility scale, has had a volatile year so far, similar to the oil complex. After posting one of the best Kensho subsector returns in Q1 2022, it reversed those gains in Q2, while still holding the top spot as the best quarterly performer among Kensho subsectors. Its overweight in Utilities adds a defensive characteristic that likely helped its performance during this market pullback. Despite the recent swings, KENERGY has been relatively stable and rangebound over the past year, and it is now close to its level from one year prior. Brazilian electric company EBS was the top contributor, primarily because of strong investor demand as the company takes steps to go private. Azure Power and Enel Americas were the index’s biggest underperformers, with no clear stock-specific catalysts to highlight.

Smart Borders (-9.4%): KDMZ, focused on securing borders and critical infrastructure, drifted sideways, ending the quarter nearly flat compared to late January levels. Given the heavy weight of Industrials (~40%) within the index, the chorus of reports of an impending recession have likely weighed on its performance. Griffon Corp, a top performer, had a solid Q1 2022 earnings season that beat consensus analyst estimates and saw its stock gain 37% over the week following the announcement, ending the quarter up 40%. Teledyne Tech was the biggest quarterly underperformer in the index (-20% in Q2 2022), erasing its gains from the brief pickup in the aftermath of the start of the conflict in Ukraine. Embraer was another notable underperformer, not helped by a weak Q1 earnings report, losing 31% in the quarter and now close to a one-year low.

Space (-10.7%): After moving within a narrow price range since December 2020, KMARS trended lower for most of the quarter, eventually falling below this range. Rising rates have likely affected the bottom line of this innovative industry as it navigates its relatively early stages of growth. Failed payload delivery added to the woes of Astra Space, which has been plagued by investigations, driving its stock price 65% lower this quarter. Geospatial intelligence firm Maxar was another notable underperformer, registering a return of -33% for the quarter, retracing the bounce in the aftermath of the start of the Russia-Ukraine conflict in February. Northrop Grumman and Aerojet RocketDyne were the top positive contributors to the index performance. Despite Lockheed's deal to acquire Aerojet being scrapped in February, a strong Q1 earnings report and upbeat sales have been supportive for Aerojet's stock price.

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iBoxx Tadawul SAR Government Sukuk Indices – Q2 2022

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Paulina Lichwa-Garcia

Associate Director, Fixed Income Indices

S&P Dow Jones Indices

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Florian Guth

Principal, EMEA Fixed Income Indices

S&P Dow Jones Indices

iBoxx Tadawul SAR Government Sukuk Index

While the iBoxx Tadawul SAR Government Index continued its negative performance in April and May, the returns started to recover in mid-June.  The big shift came after the Federal Reserve announced the biggest interest rate hike since 1994 (up 75 bps) on June 15, 2022.  This major Fed policy change alleviated inflation fears and helped the long end of the sukuk curve stage a recovery.  The long end of the sukuk curve registered the highest change quarter-over-quarter, while the short end of the sukuk curve performed better in a month-to-date comparison.

iBoxx Tadawul SAR Government Sukuk Indices – Q2 2022 - Exhibit 1

iBoxx Tadawul SAR Government Sukuk Indices – Q2 2022 - Exhibit 2

iBoxx SGD Monthly Commentary: June 2022

June 2022 Performance

Persistent high inflation and monetary tightening have underscored a challenging global economic path ahead. The prospects of maintaining economic growth and waiting for inflation to subside without further hawkish action from central banks have come into question. Markets have responded with larger movements than have been seen in recent years. Major equity indexes have fallen into bear market territory, down over 20% from recent highs, while bonds have seemingly lost some of their diversification benefit in a stockbond mix.

In Singapore, the economy is expected to grow by 3.8% in 2022, down from the forecast of 4.0%, according to a recent survey by the Monetary Authority of Singapore. Meanwhile, the Straits Times Index sank 4.0% in June and was down 10% from its 52-week high. Not far behind in negative performance was the iBoxx Singapore Dollar (SGD) Overall Index, which fell 1.63% this month and has dropped 6.87% YTD.

All rating subindices fell into red, with the worst performance coming from sectors rated A and above. While losses were observed across the maturity buckets, the sharpest declines were seen in the mid-to-long end of the curve.

The sovereign and non-sovereign subindices suffered losses over 1% this month. The top performers were short-dated corporate bonds from Consumer Goods, Financial Services and Real Estate sectors. In contrast, the worst performers were long-dated bonds issued by the
Singapore government or one of Singapore’s statutory boards.

The overall index ended the month with a yield of 3.23% and a duration of 6.57 years.

S&P Latin America Equity Indices Quantitative Analysis Q2 2022

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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: Q2 2022

Following a stellar Q1 in which the S&P Latin America BMI jumped 25%, the regional equity market fell back to Earth as second-quarter losses more than offset first-quarter gains. However, the region remained a relatively bright spot compared to global equities more broadly, as the S&P Latin America BMI was only down 3.5% YTD compared with losses of around 20% YTD for the S&P 500 and S&P Global BMI.

Global inflation concerns, rising interest rates in the U.S., the Russia-Ukraine war and political uncertainty with new governments in Chile, Peru and, most recently, Colombia have finally caught up with the region. In addition, Brazil, the largest market in Latin America, will be holding presidential elections this year, contributing to further uncertainty.

From a country perspective, Chile had the best returns in Q2, with the flagship S&P IPSA gaining nearly 0.30% in CLP. The broader Chilean index, the S&P/CLX IGPA, did better with a 3.1% return for the same period. All other markets, in local currency, had negative returns for Q2.

No sector was unscathed in Q2. It is interesting to note that while Health Care (-42.1%), Consumer Discretionary (-40.0%) and I.T. (-39.1%) were the worst performers, they were not necessarily the main contributors to the quarterly losses. It’s more likely that sectors with large representation in the region, such as Financials, Materials and even Consumer Staples, which were down 25.3%, 21.0% and 13.8%, respectively, had the most significant impact on the downturn of the equity market.

Similarly, most of the losses were driven by Brazilian and Mexican companies, which together represent about 88% of the S&P Latin America BMI. The top 10 index constituents accounted for nearly one-third of the Q2 index decline. Brazilian companies Vale S.A., B3 S.A. and Itau Unibanco had the most significant impact on the index.

Though it is perhaps not surprising that the markets have taken a turn for the worse given the local political turmoil, rising inflation, the Russia-Ukraine war and the lingering effects of COVID-19, it is still disappointing to see the markets drop this sharply. While there is no telling where the bottom may be, volatility is likely to continue. Let’s hope the next turn will be an upswing.

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