Markets reversed sharply to end August as Powell’s Jackson Hole speech included forecasts of “pain.” Similar to July, we find it relevant to look at factor performance before and after Powell’s comments. We believe risk factors continue to provide important color alongside global central bank policy.
In this July report we navigate risk factor performance amid a landscape of looming recession and rallying markets. We also investigate performance before and after the July Fed meeting, which prompted strong reactions from core macro factors such as Equity and Interest Rates.
This was officially the worst first half of the year for developed market equities in half a century. Some factors that have been resilient continued their outperformance in June (Trend Following), while others struggled. In this report we evaluate both June and YTD, reviewing what’s worked for factor performance and what’s changed.
Following the 8.6% inflation surprise on June 10, the Fed hiked rates by 75 bps, the largest hike since 1994. During the following week, Two Sigma’s Venn global Equity factor finished the week down a significant -5.38% while four other factors acted as safe havens.
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.