In This List

U.S. Equities Market Attributes September 2020

U.S. Equities Market Attributes August 2020

U.S. Equities Market Attributes July 2020

Investment in Innovation: Opportunities for Potential Outperformance across the Market-Cap Spectrum

S&P GIVI® Japan and Major Single Factors Q2 2020

U.S. Equities Market Attributes September 2020

Contributor Image
Howard Silverblatt

Senior Index Analyst, Product Management

KEY HIGHLIGHTS

MARKET SNAPSHOT

The champagne continued to be popped, as the month opened with two consecutive days of new closing highs (3,580.84; 22 YTD). However, what goes up, must come down, and what goes up too fast eventually brings smiles to short sellers and agita to the market.

Aiding the market’s decline was the growing concern over a pullback in openings (due to higher COVID rates), re-closings and restrictions (especially in Europe), and chaotic U.S. school openings, as many areas appeared to be ill prepared (even though it had been planned for months), as “kids will be kids” (especially on the higher education level) spread the virus. Starting to add to the market concern is the upcoming presidential election on Nov. 3, 2020. Typically, more trading positions (reallocations) would be taken by now, but the uncertainty of the outcome, which includes when we will know who won, has produced paper portfolios, but limited trading action. Even the first presidential debate (with two more planned for Oct. 15 and 22, 2020) and a fight over filling the vacant Supreme Court position failed to bring out significant confirmed trades. It’s expected that the impact will increase significantly in October (don’t even want to think about November yet), and the view of the outcome will drive trades.

pdf-icon PD F DOWNLOAD FULL ARTICLE

U.S. Equities Market Attributes August 2020

Contributor Image
Howard Silverblatt

Senior Index Analyst, Product Management

KEY HIGHLIGHTS

MARKET SNAPSHOT

It wasn’t a perfect month, but with the S&P 500’s 7.01% gain, some may label it as such given it was the best August since 1986’s 7.12%. However, the last week of the month (up 3.64%) was a perfect week—five consecutive days of new closing highs (3,508.01; an event not seen since Oct. 16-20, 2017, and March 16-20, 1998, before that), and a new intraday high (3,514.77, set on the last day of the month). On the way to these highs, the index passed (and closed above) the 3,400 and 3,500 levels for the first time. Year-to-date, it posted 20 new closing highs, and it has posted 144 since the U.S. November 2016 election, with 64 days left until the next election date. The impressive run up since the March 23, 2020, low (56.45%, 176% annualized) has astonished professional money managers, as they seek to justify the optimism that has the index selling at a 21.3 P/E based on 2021 earnings (a value that would be considered high, if it were based on the current 12-month earnings, much less discounted 16 months into the future). What gives with the current version of “irrational exuberance” is the market’s optimism over COVID-19, that it will be tamed, if not cured (treatment if not a cure, easy and inexpensive testing, and moving it out of the death column and into a bad two weeks penalty box). I should note that when the Maestro used that term on Dec. 5, 1996, the index was up 21.0% YTD and selling at a trailing 12-month P/E of 18, compared with 28 today; of course, the index did go up another 105% until the March 24, 2000, high (from 745 to 1,527).

pdf-icon PD F DOWNLOAD FULL ARTICLE

U.S. Equities Market Attributes July 2020

Contributor Image
Howard Silverblatt

Senior Index Analyst, Product Management

KEY HIGHLIGHTS

MARKET SNAPSHOT

The number of new daily cases of COVID-19 reported in the U.S. reached 77,000, a record level, as over 4.6 million people in the U.S. were infected (17.5 million globally), with over 153,000 deaths (677,000).

The first month of earnings season started slowly, but picked up, as 62% of S&P 500 issues, representing 75% of the index value, reported.  Companies took a little longer to review the COVID-19 situation and then decide what they wanted to tell the world (shareholders, competitors, and customers).  The reported earnings results had 82.1% of the issues beating their estimates, which had been lowered by 47.9% (always nice to ensure a beat), as earnings continued to get front-page news but didn’t get the front-page headline.  The U.S. Congress was in the public eye, but still was not the front-page headline, as the group returned after a break to battle COVID-19, not via the medical lab, but via negotiations to pass another (Phase Four) COVID-19-related aid package.  The Senate (Republicans) unveiled their USD 1 trillion bill, which will now be negotiated with the USD 3.5 trillion bill from the House (Democrats).  The key to the package appears to be an extension (potentially with changes) of the expired Federal Pandemic Unemployment Compensation, which gave an additional weekly unemployment benefit of USD 600 (the House bill brings it back to January 2021, the Senate cuts it to USD 200 until September 2020, then uses a formula based on wages with a cap after that), as well as direct aid to states (the House has USD 1 trillion for states and schools, the Senate has USD 105 billion for schools and no new aid for states).


Investment in Innovation: Opportunities for Potential Outperformance across the Market-Cap Spectrum

Contributor Image
John van Moyland

Managing Director, Global Head of S&P Kensho Indices

It is of no surprise to anyone following the markets of late that the returns of larger companies have generally fared better than their smaller brethren during the pandemic.  The extent of this dynamic was brought into sharp relief when looking at YTD total returns through May 29, 2020: the large-cap S&P 500® returned -4.97%; the S&P MidCap 400® returned -13.86%; and the S&P SmallCap 600® returned -20.81%.  In the small-cap segment, the Russell 2000 reflected the same story over this period with a return of -15.95%. 

Meanwhile, the equivalent market-cap segments of the S&P Kensho New Economies Composite Index, which seeks to capture the industries and innovation of the Fourth Industrial Revolution, have significantly outperformed their broad market peers by 3.96%, 9.35%, and a substantial 16.49%, respectively, over this same time period (see Exhibit 1).

commentary-market-commentary-investment-in-innovation

This persistent outperformance across market-cap segments may illustrate the positive impact of the security selection effect and underscores the benefits of a robust, disciplined, and transparent framework when investing in innovation and growth.

This commentary will discuss our approach to capturing the New Economies and explore how persistent this pattern has been over different time periods and weighting strategies.  Let’s start out with some context setting.

pdf-icon PD F DOWNLOAD FULL ARTICLE

S&P GIVI® Japan and Major Single Factors Q2 2020

Contributor Image
Tianyin Cheng

Senior Director, Strategy Indices

Contributor Image
Izzy Wang

Analyst, Strategy Indices

The S&P GIVI (Global Intrinsic Value Index) Japan underperformed its benchmark index, the S&P Japan BMI, by 6.09% in Q2 2020. Since its launch in March 2012, the S&P GIVI Japan has underperformed its benchmark index by 62 bps per year, with a tracking error of 2.68%.

Following the sharp decline in Q1 2020, the Japanese equity market rebounded by 11.77% in Q2 2020, as measured by the S&P Japan BMI. However, the S&P Japan BMI posted -8.31% YTD. As in other major markets, the recovery in Q2 2020 was mainly boosted by government stimulus and good news in the fight against COVID-19. This quarter, the Japanese government approved a record stimulus package equaling about 40% of GDP to prevent COVID-19 from causing further economic deterioration. After lifting the National State of Emergency in late-May, the Japanese economy started to gradually reopen. While partially encouraged by these positive signs, investors stayed cautious amid the uncertainties around U.S.-China tensions and a second wave of COVID-19 cases. 

As the economy gradually reopened, almost all sectors showed signs of rebounding. Materials, Consumer Discretionary, and Industrials, which were severely hurt in Q1 2020, had strong comebacks, with double-digit returns this quarter. Hotels and Industrial REITs contributed the most to the mild recovery in Real Estate, while Office provided some drag. Information Technology was the bestperforming sector, due to increased demand for hardware and software support in the new normal of internet-based life. Health Care and Communication Services, the two sectors whose performance benefited from the COVID-19 crisis for providing healthcare products and supporting social distancing practices, respectively, continued to lead in Q2 2020 and reversed the loss from the previous quarter. Utilities was the only sector that posted a negative return, largely due to the dire economic projection. 

The underperformance of the S&P GIVI Japan in Q2 2020 was mainly due to the selection effect in Industrials and Information Technology.  

pdf-icon PD F DOWNLOAD FULL ARTICLE

Processing ...