In this special edition Venn Factor Performance Report, we cover the ongoing Russian invasion of Ukraine and the impact it has continued to have on markets and factors over the first two weeks of March. We observed historic movements across macro and style factors along with notable rotations between the first and second weeks of the month.

Week 1: Feb 28 - Mar 4, 2022

Source: Venn by Two Sigma. The median and percentile columns measure the performance of each factor in the Two Sigma Factor Lens relative to the entire history of the factor in USD, using weekly data for the period March 1, 1995 - March 4, 2022.


In the first week (including the last day of February), 15 of the 18 factors in the Two Sigma Factor Lens experienced top or bottom quintile movements:

  • The Equity and Interest Rates factors moved in opposite directions as risk-off sentiment prevailed. The Russian invasion of Ukraine showed few signs of relenting. While two rounds of negotiations between the Russian and Ukrainian delegations led to the possible creation of humanitarian corridors, little other progress was made.1
  • The Credit factor, after residualization to the Equity and Interest Rates factors, also moved lower, as risk aversion continued to push credit spreads wider.2
  • The Commodities and Foreign Exchange Carry factors each experienced their best weekly performance since the inception of the Two Sigma Factor Lens (March 1, 1995): 
    • Within commodities, supply shocks rippled through the energy, metals, and agricultural sectors.3
    • In currency markets, taking advantage of interest rate differentials continued to pay off, a trend that began in February. Short positioning in the EUR was a notable positive contributor as the currency continued to fall, with some market participants expecting it to reach parity with the USD before the end of the year.4
  • The Local Equity factor, which is residualized to Equity, made a notable move up, 1.21%. Although U.S. equity markets were not insulated from the war, they fared better than equities across the rest of the world, especially when compared to Europe. Net outflows from European equities hit $6.7bn in a single week, the highest in five years.5
  • Emerging Markets moved even lower, tacking on losses to a tough month in February. Following a wave of sanctions, several index providers announced the removal of Russian securities, causing severe markdowns for investors that owned them.6
  • Within equity styles:
    • After falling in February, the Low Risk and Quality factors sharply rebounded, with all underlying components for both factors higher on the week.
    • Momentum and Value were also up, despite their long-term negative correlation with each other.
    • The Crowding factor continued to move meaningfully lower as seen in February.

Week 2: Mar 7 - Mar 11, 2022

Source: Venn by Two Sigma. The median and percentile columns measure the performance of each factor in the Two Sigma Factor Lens relative to the entire history of the factor in USD, using weekly data for the period March 1, 1995 - March 11, 2022.


In the second week, many factors reversed course:

  • The Interest Rates factor experienced one of its worst weeks on record, as yields rebounded sharply, reaching levels not seen since June 2019. Investors bet the Fed would continue with its rate-hiking path despite the continuing Russia-Ukraine war,7 and this was validated by last week’s Fed meeting which sent rates even higher.8  
  • Commodities started to slow, with Venn’s raw factor input down -0.49% on the week. While the resulting Commodities factor in Venn was slightly up, it was due to its residualization against Equity and Interest Rates as well as a global currency basket (Short USD, Long G10 FX ex-USD), all of which were down. 
    • Oil prices tumbled during the week, with market participants pointing to comments from some within OPEC that they wanted to produce more oil. 
    • Additionally, rising Omicron cases in China and the country’s stringent policies to prevent the spread of the disease have led investors to expect less near-term demand for oil due to fresh lockdowns.9
  • Venn’s Local Inflation factor (in USD) experienced its largest weekly increase since the inception of the Two Sigma Factor Lens (March 1, 1995), up 3.96%. Labor Department data showed that U.S. inflation hit a 40 year high of 7.9% year-over-year in February on rising gas, food, and housing prices, with inflation poised to climb even higher due to the Russia-Ukraine war.10 
  • Within equity styles:
    • The Low Risk and Quality factors both swung negative on the week after climbing considerably in the preceding days. The beta component of Low Risk dragged the factor down, as stocks with low market betas underperformed those with high market betas. Gains in Earnings Quality were not enough to offset losses in Leverage, Investment Quality, Earnings Variability, and Profitability for the Quality factor.


Source: Venn by Two Sigma. The first column represents the performance of each factor in the Two Sigma Factor Lens in USD, for the period February 28, 2022 - March 4, 2022. The second column represents the performance of each factor in the Two Sigma Factor Lens in USD, for the period March 7, 2022 - March 11, 2022.


Stay tuned for more in-depth Macro commentary in the upcoming March edition of the Venn Factor Performance Report (see the February VFPR here).


Interested in your portfolio's exposures to these factors?

References to the Two Sigma Factor Lens and other Venn methodologies are qualified in their entirety by the applicable documentation on Venn.













This article is not an endorsement by Two Sigma Investor Solutions, LP or any of its affiliates (collectively, “Two Sigma”) of the topics discussed. The views expressed above reflect those of the authors and are not necessarily the views of Two Sigma. This article (i) is only for informational and educational purposes, (ii) is not intended to provide, and should not be relied upon, for investment, accounting, legal or tax advice, and (iii) is not a recommendation as to any portfolio, allocation, strategy or investment. This article is not an offer to sell or the solicitation of an offer to buy any securities or other instruments. This article is current as of the date of issuance (or any earlier date as referenced herein) and is subject to change without notice. The analytics or other services available on Venn change frequently and the content of this article should be expected to become outdated and less accurate over time. Any statements regarding planned or future development efforts for our existing or new products or services are not intended to be a promise or guarantee of future availability of products, services, or features.  Such statements merely reflect our current plans.  They are not intended to indicate when or how particular features will be offered or at what price.  These planned or future development efforts may change without notice. Two Sigma has no obligation to update the article nor does Two Sigma make any express or implied warranties or representations as to its completeness or accuracy. This material uses some trademarks owned by entities other than Two Sigma purely for identification and comment as fair nominative use. That use does not imply any association with or endorsement of the other company by Two Sigma, or vice versa. See the end of the document for other important disclaimers and disclosures. Click here for other important disclaimers and disclosures.

This article may include discussion of investing in virtual currencies. You should be aware that virtual currencies can have unique characteristics from other securities, securities transactions and financial transactions. Virtual currencies prices may be volatile, they may be difficult to price and their liquidity may be dispersed. Virtual currencies may be subject to certain cybersecurity and technology risks. Various intermediaries in the virtual currency markets may be unregulated, and the general regulatory landscape for virtual currencies is uncertain. The identity of virtual currency market participants may be opaque, which may increase the risk of market manipulation and fraud. Fees involved in trading virtual currencies may vary.


Recent Posts