Research & Insights

Our investment decisions flow from incisive perspectives.

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Q1 2021

Kai W. Hong, CFA
Managing Partner & Chief Investment Strategist

+51%, +18%, +93%, +135%, -44%, +68%, -31%, -60%, +3%, -42%, +19%.  These were the daily returns in GameStop (GME) stock in a wild two weeks from January 22 to February 5 that saw Reddit, Robinhood, and Roaring Kitty dominate market news.  While the re-emergence of Value might have been notable to industry insiders, the gamification of the US equity market captured the interest of the broader public.  Fundamental analysis seemed like a quaint notion in a market where a lightly organized group of people could turn a $1 billion market cap money-losing company into a $24 billion market cap money-losing company in a matter of days.  While things appear to have settled down by the end of the quarter, one can wonder whether something about the markets has changed.  Time will tell.  Oh, and 10Y US Treasury yields ONLY doubled.

Supported by an improving macroeconomic outlook, the Russell 3000 Index finished the quarter with a return of +6.4% as value and smaller capitalization companies led the way.  Large cap stock returns were still respectable as the Russell 1000 Index returned +5.9%.  However, following their best quarterly gain ever in Q4, small cap stocks continued to lead with the Russell 2000 Index returning +12.7%.  Returns in international markets were more modest as a bout of dollar strength (+3.7% for the USD index) and less favorable pandemic trends weighed on results.  The developed market MSCI World ex USA Index returned +4.0% while the developing market MSCI Emerging Markets Index returned +2.3%.  A significant jump in US 10Y yields hurt fixed income returns, but higher yielding credit was a relative outperformer.  The Bloomberg Barclays US Aggregate Index returned -3.4% while the Corporate High Yield Aggregate returned +0.9%.  Performance in non-US fixed income was more challenged as the Global Aggregate ex-US Index returned -5.3% and the JPM EM Bond Index returned -4.5%.

At the Sector level in US equities, the rally continued to be led by the cyclical sectors of Energy (+31.5%), Financials (+16.4%), Industrials (+11.3%), and Materials (+17.4%).  Once again, every sector posted positive returns for the quarter as investor sentiment improved on stronger macroeconomic data and optimism regarding the management of the pandemic.  With the rotation, the laggards were pandemic beneficiaries like Technology (+1.5%), Consumer Staples (+2.1%), and Health Care (+2.5%).  A similar story took hold outside of the US with Energy (+9.5%) and Financials (+8.5%) also leading.  The main detractors were Health Care (-4.0%) and Consumer Staples (-1.9%).

In a mixed quarter for country returns, the range went from -17% to +16%.  A set of smaller markets led performance with Saudi Arabia (+15.8), Chile (+15.5%), and UAE (+13.7%) among a group of six countries posting greater than 10% returns.  Colombia (-17.1%), Turkey (-15.5%), and Peru (-10.4%) were the main laggards.  Among the major markets, the United Kingdom (+6.4%) outperformed while Japan (+1.9%) and China (+0.2%) underperformed.

Given the significant upward movement in interest rates, all of the main sectors within core US fixed income markets were negative, but performance was weakest in Corporate Investment Grade (-4.7%) and Treasuries (-4.3%).  The securitized sectors of ABS (-0.2%), MBS (-1.1%), and CMBS (-2.3%) were only incrementally better.  Outside of the core sectors, US High Yield (+0.9%) and Leveraged Loans (+1.8%) were able to post positive returns while Municipals (-0.4%) and Inflation-Linked Treasuries (-2.0%) were negative but outperformed.  Emerging market debt saw highly divergent returns as the Government sector (-6.7%) meaningfully underperformed Corporates (-0.8%).

Overall market volatility was higher than historical averages with January and February seeing significant increases in the VIX.  Trade volumes were also higher than average, as the meme-stock rally epitomized by GameStop likely drew in a large number of retail investors.  Market breadth was generally positive.  At the factor level, Value was dramatically positive, continuing a recovery started in September of last year.  Smaller Size and Yield were also highly additive exposures.  Stability was again dramatically negative as the quarter continued to favor cyclical recovery plays, and this ongoing reversion led to negative results in Momentum and Quality. With the move of market leadership away from mega cap growth, equal-weighted portfolios meaningfully outperformed market cap-weighted portfolios.

Q2 2020

Kai W. Hong, CFA
Managing Partner & Chief Investment Strategist

What a difference a quarter makes!  Despite a rash of historically bad economic data points and the generally unabated spread of the COVID-19 virus, investors seized upon *any* indication that things were not *that* bad to get their risk on.  Unemployment remained in the teens and infection counts headed into the millions, but the equity markets posted some of the fastest recoveries ever seen.  By the end of the quarter, US large cap growth stocks and the tech-heavy NASDAQ composite had more than recovered all of their losses, going on to post new record highs.  Many notable investors had to concede that they had been too bearish, with retail investors (and all those new Robinhood accounts) getting to enjoy a fair bit of schadenfreude.

The Russell 3000 Index finished the quarter with a return of +22.0%, recovering a significant amount of the prior quarter’s losses.  Small cap stocks finally saw some outperformance in the rebound as the Russell 1000 Index returned +21.8% while the Russell 2000 Index returned +25.4%.  International markets were also strongly positive but lagged the US markets, despite some modest USD weakness.  The developed market MSCI World ex USA Index returned +15.3% while the developing market MSCI Emerging Markets Index returned +18.1%.  With extensive support from the US Fed, credit-sensitive fixed income markets also posted solid returns, while long US Treasuries took a breather from the incredible rally of the prior quarter.  The Bloomberg Barclays US Aggregate Index returned +2.9%.  Performance in non-US fixed income was a bit stronger with the Global Aggregate Index returning +3.4% and the JPM EM Bond Index returning +12.3%.

At the Sector level in US equities, the rebound was led by the economically-sensitive areas of Consumer Discretionary (+37.5%) and Energy (+32.8%) and the always in favor area of Technology (+31.8%).  It was a broad-based rally with all sectors posting positive returns for the quarter as enthusiasm was in great abundance.  The defensive sectors of Utilities (+2.4%) and Consumer Staples (+8.9%) were relative laggards in the rally, having held up better in the decline.  Outside of the US, Materials (+27.1%) and Technology (+26.7%) were the best performing sectors while Real Estate (+9.0%) and Energy (+10.5%) lagged.  As in the US, all sectors posted positive returns, but the spread in performance of the best and worst sectors was only half as wide.

All country equity markets posted positive aggregate returns in the quarter.  Argentina (+35.2%) and Australia (+31.8%) were the best performers, but nineteen markets posted better than 20% returns.  While still respectable, results in Qatar (+8.5%), the UK (+8.9%), and Hong Kong (+9.6%) were more modest.

Within core US fixed income markets, performance was strongest in the spread sectors with Corporate Investment Grade (+9.0%) leading the way.  Securitized sectors also did well with CMBS (+4.0%) and ABS (+3.5%) outperforming the broader market.  Treasury (+0.5%) and MBS (+0.7%) returns were more modest given limited movement in interest rates during the quarter.  Outside of the core sectors, US High Yield (+9.6%) and Leveraged Loans (+9.7%) posted strong recoveries from the sharp declines and market dysfunctions of the prior quarter.  Emerging market debt also benefited from robust sentiment with Corporates (+11.2%) and Governments (+9.8%) both performing well.

Market volatility, which had spiked in February and March, declined but remained at levels which were higher than the historical averages.  Trade volumes continued to be elevated and market breadth was significantly positive.  At the factor level, Smaller Size was finally positive with Quality and Momentum also additive exposures.  Value and Stability were significantly negative, with Value continuing a dismal run of underperformance in both up and down markets.  Market leadership broadened out a bit, leading equal-weighted portfolios to outperform market-cap weighted portfolios.

Q1 2020

Kai W. Hong, CFA
Managing Partner & Chief Investment Strategist

Coming into the new year, markets took a reasonable pause given the stellar returns of the prior year.  However as COVID-19 metastasized from a regional health crisis into a global pandemic, it precipitated a dramatic rise in the level of uncertainty in the global markets that we have not seen since the Global Financial Crisis in 2008.  Unlike trade wars or sovereign debt crises, the impact on global economic activity of an escalating worldwide lockdown defied easy quantification, and the market reaction was severe.  Daily volatility increased significantly, and it was very much a trading oriented market.  In the short-term, “where” one has been invested, i.e. how you have been positioned, has been much more relevant to returns than “what” one has invested in.  The fact that valuations across a number of asset classes were elevated exacerbated the selling pressure once the correction began.  Trading in passive vehicles appears to have caused some dislocations in the markets as well.  Liquidity has been a challenge in the fixed income markets with even US Treasuries feeling the effects.

The Russell 3000 Index finished the quarter with a return of -20.9%, erasing a significant amount of the prior year’s gains.  Even in the downturn, large cap stocks continued to perform better than small caps.  The Russell 1000 Index returned -20.2% while the Russell 2000 Index returned -30.6%.  International markets performed largely in-line with US markets with the difference in returns due to the relative strength of the US dollar.  The developed market MSCI World ex USA Index returned -23.3% while the developing market MSCI Emerging Markets Index returned -23.6%.  Although there were pockets of dislocation and stress in lower grade securities, the fixed income markets fared much better, particularly with the incredible drop in US Treasury yields (US 10 year yields fell 125 basis points during the quarter!).  The Bloomberg Barclays US Aggregate Index returned +3.2%.

At the Sector level in the US, cyclical and economically-sensitive areas fared the worst in the market rout with Energy (-51.9%) crushed under the twin pressures of a sudden global economic stop and an oil price war between Russia and Saudi Arabia.  Financials (-32.7%), Materials (-28.0%), and Industrials (-27.8%) were other significant decliners.  Technology (-12.9%), Health Care (-13.1%), and Consumer Staples (-13.4%) held up relatively well in comparison.  Outside of the US, Energy (-38.0%) and Financials (-31.0%) were also the weakest segments of the market.  Health Care (-8.7%) and Communication Services (-13.9%) were the relative outperformers while Technology (-17.8%) did not hold up as well given the larger proportion of cyclically-sensitive semiconductor names.

No countries were spared in the market sell-off with all posting negative returns in aggregate.  Denmark (-7.7%), China (-10.2%), and Switzerland (-11.1%) were the best relative performers while Brazil (-50.2%), Colombia (-49.7%), and Greece (-45.1%) were the worst performers.

Market volatility, which had been largely dormant for the last several years, soared with March seeing the highest level in the history of the VIX index.  Trade volumes exploded and market breadth was significantly negative.  At the factor level, Value and Smaller Size were significantly negative, showing no recovery even with the sharp turnaround in market direction.  Stability, Quality, and Momentum were positive.  Even in the drawdown, market leadership remained narrow leading equal-weighted portfolios to underperform market-cap weighted portfolios.

December 2018

Kai W. Hong, CFA
Managing Partner & Chief Investment Strategist

After three quarters in which a host of geopolitical uncertainties and slowing global economic growth saw investors continue to boost US equities at the expense of everything else, the combination of increasing political dysfunction in the US (culminating with a government shutdown in December) and ongoing and unresolved concerns over trade were finally enough to catalyze a broad-based sell-off in the fourth quarter. The US Fed’s hawkishness only added to the negative sentiment around risk assets. While measures of consumer sentiment were generally positive given modestly rising wages, businesses were beginning to warn more consistently of the negative impacts that the trade disputes were having on current operations and future planning.

Given all of these factors, US markets posted significantly negative results for the fourth quarter, with some entering “bear” territory and others barely staying above. The Russell 3000 Index finished the quarter with a return of -14.3%, one of its worse performances ever. Small cap stocks were particularly hard hit with the Russell 2000 Index returning -20.2% versus the Russell 1000 Index returning -13.8%. Markets outside of the US fared somewhat better, having already posted negative returns for the year so far. The developed market MSCI World ex USA Index returned -12.8% while the developing market MSCI Emerging Markets Index returned -7.5%. Fixed income markets held up much better in the sell-off with the Bloomberg Barclays US Aggregate Index returning +1.6%.

In the US at the Sector level, Energy (-26.3%) was the worst performer for the quarter by far as oil prices fell precipitously on supply and demand concerns. Returns in Technology (-18.2%) and Producer Durables (-18.1%) were also strongly negative. The only relative safe havens in the drawdown were the defensive sectors of Utilities (-3.0%) and Consumer Staples (-6.7%).

Outside of the US, the sectors trends were largely the same. Energy (-16.0%) and Technology (-15.1%) were also the main detractors while Utilities (-3.5%) and Consumer Staples (-7.3%) held up better. At the country level, the best and worst performers were once again found among the smaller markets. Austria (-19.5%) and Greece (-19.2%) led decliners while Brazil (+14.2%) and Indonesia (+11.6%) rallied.

Market volatility jumped significantly during the quarter with implied and actual price volatility measures reaching materially above average levels. At the factor level, Smaller Size and Momentum were both strongly negative while Stability, Yield, Value, and Low Volatility were meaningfully positive. An equal-weighted portfolio underperformed the market-cap weighted portfolio once again as larger cap names outperformed.

November 2018

Kai W. Hong, CFA
Managing Partner & Chief Investment Strategist

Trade and geopolitical uncertainty continued to be on the forefront of investors’ minds in November. Although many markets (most notably emerging markets) posted positive returns for the month, the path to those gains was anything but smooth. The Russell 3000 Index finished the month with a return of +2.0% but had been down for the period coming into the final week. Smaller cap stocks were slightly off the pace with the small cap Russell 2000 Index returning +1.6% versus the large cap Russell 1000 Index’s return of +2.0%. Performance in non-US markets was more divergent. The developed market MSCI World ex USA Index returned a modest -0.1% while the developing market MSCI Emerging Markets Index returned +4.1%. The US dollar was incrementally higher which dampened returns for US investors. Fixed income markets were mixed as yields fell but credit concerns rose. The Bloomberg Barclays US Aggregate returned +0.6%.

At the sector level in the US, Health Care (+6.2%) was the best performing sector with Materials (+3.5%), Producer Durables (+3.4%), and Utilities (+3.2%) also strongly positive. Energy (-3.2%) was the worst performing sector as supply pressures continued to weigh while Technology (-2.5%) was also negative on earnings and growth concerns.

Outside of the US, Utilities (+3.9%) and Technology (+2.4%) were the best performers with Technology results being a notable difference from the US. Energy (-4.1%) and Materials (-2.5%) were the only negative sectors for the month. At the country level, emerging markets were the main leaders with Turkey (+13.2%), Indonesia (+13.0%), and Macau (+12.8%) significantly positive. The small markets of Argentina (-8.9%), Malta (-8.7%), and Greece (-5.2%) led decliners.

While the month saw streaks of positive and negative performance, market volatility as shown by realized and implied volatility measures was actually lower than what was witnessed in the sell-off of the prior month. Trade volumes also declined from the prior month but were still at slightly higher levels than the recent past. At the factor level, the defensive attributes of Stability, Value, and Yield were positive while Quality, Momentum, and Smaller Size were modestly negative. Equal-weighted portfolios underperformed market-cap weighted portfolios once again given the drag of smaller size.

October 2018

Kai W. Hong, CFA
Managing Partner & Chief Investment Strategist

October was host to a broad-based market decline as concerns over trade and uncertainty around the outcome of the impending US mid-term elections caused investors to reassess their positioning. The Russell 3000 Index finished the month with a return of -7.4%. Smaller cap stocks and growth-oriented names bore the brunt of the risk-off sentiment. The small cap Russell 2000 Index returned -10.9% versus the large cap Russell 1000 Index’s return of -7.1%. Equity markets were overwhelmingly negative around the world and few safe havens could be found. The developed market MSCI World ex USA Index returned -8.0%, and the developing market MSCI Emerging Markets Index returned -8.7%. The US dollar rallied in the month, adding to the negative returns for US investors. Fixed income markets were modestly negative as yields increased incrementally. The Bloomberg Barclays US Aggregate returned -0.8%.

At the Sector level in the US, Energy (-12.0%) was the worst sector as oil prices began a precipitous drop from recent highs of mid-$70s/barrel. Materials (-11.1%) and Producer Durables (-10.8%) were also significant decliners. Defensive areas such as Consumer Staples (+1.4%) and Utilities (-0.1%) were spared in the drawdown.

Outside of the US, all sectors were negative with the formerly high-flying Technology sector (-11.9%) pacing the decliners. Results in Materials (-10.0%), Producer Durables (-9.9%), and Consumer Discretionary (-9.6%) were also meaningfully negative. At the country level, almost all countries were negative with emerging markets once again the most notable markets. Mexico (-17.2%) and South Korea (-14.4%) were on one end, and Brazil (+18.8%) was on the other.

Market volatility spiked up as realized and implied volatility measures hit near-term peaks. Trade volumes were also higher but, highlighting the extended soporific state of the markets, only managed to reach their historical averages. At the factor level, Smaller Size was very negative while exposure to Momentum also detracted. Stability, Value, Yield, and Low Volatility – all defensive in nature – posted decently positive results. Equal-weighted portfolios underperformed market-cap weighted portfolios given the drag of smaller size.

September 2018

Kai W. Hong, CFA
Managing Partner & Chief Investment Strategist

Trade was once again the most conspicuous concern for the markets in the quarter. With the posturing from each party becoming more and more confrontational, it was hard to see any “winners” emerging for all the “losses” of comity and shared beliefs in the benefits of free trade, hallmarks of what used to mark these discussions. However, with consumer and business confidence strong in the US, supported by an exceedingly robust job market and healthy corporate performance, investors were largely able to look past the negative news. Towards the end of the quarter, what started to weigh on the markets more was the upward move in interest rates that accompanied this good economic outlook. The yield on the US 10Y moved consistently above 3% which began to dent investor enthusiasm for risk assets.

Despite this myriad of geopolitical tensions, US markets posted strong results for the third quarter. The Russell 3000 Index finished the quarter with a return of +7.1%, one of the strongest quarters of the last several years. In a reversal of the second quarter, small cap stocks lagged meaningfully with the Russell 2000 Index returning +3.6% versus the Russell 1000 Index returning +7.4%. Markets outside of the US were more mixed. The developed market MSCI World ex USA Index returned +1.3% while the developing market MSCI Emerging Markets Index returned -1.1%. Fixed income markets were fairly muted with the Bloomberg Barclays US Aggregate Index returning +0.0%.

In the US at the Sector level, Health Care (+13.2%) was by and far the best performer for the quarter as investor enthusiasm for growth stories returned. Returns in Producer Durables (+8.9%) and Technology (+8.8%) were also strongly positive. While all sectors were positive for the quarter, the cyclical sectors of Energy (+0.0%) and Materials (+0.5%) were relative laggards.

Outside of the US, Health Care (+4.5%) also led but with a much more modest return. Unlike in the US, Energy (+4.1%) was actually another strong sector in non-US markets. The growth sectors of Consumer Discretionary (-2.8%) and Technology (-1.8%) were the main negative performers. At the country level, the best and worst performers were once again some of the smaller markets. On the positive side were Luxembourg (+16.2%), Thailand (+13.0%), and Poland (+12.5%) while Turkey (-20.9%), Greece (-19.3%), and Macau (-19.2%) led decliners.

Market volatility fell to even lower levels in the quarter with implied and actual price volatility measures both close to a full standard deviation lower than their historical averages. At the factor level, Smaller Size and Value were both strongly negative while Stability and Low Volatility rebounded from the weak performance of the prior quarter. Momentum was also positive while Quality was neutral. An equal-weighted portfolio underperformed the market-cap weighted portfolio as market breadth narrowed once more.

August 2018

Kai W. Hong, CFA
Managing Partner & Chief Investment Strategist

August saw the continued dominance of the US markets. The Russell 3000 Index finished the month with a return of +3.5%. Smaller cap stocks led on increased risk appetite and a perception that they were more insulated from trade issues. The small cap Russell 2000 Index returned +4.3% versus the large cap Russell 1000 Index’s return of +3.5%. Most other equity markets declined on concerns over trade and a roiling crisis in emerging markets. The developed market MSCI World ex USA Index returned -1.9%, and the developing market MSCI Emerging Markets Index returned -2.7%. US dollar strength added incrementally to the negative returns for US investors. Fixed income markets were modestly positive as US 10 year yields fell slightly. The Bloomberg Barclays US Aggregate returned +0.6%.

At the Sector level in the US, Technology (+7.1%) was the standout performer by far although other growth-oriented areas such as Consumer Discretionary (+4.8%) and Health Care (+4.8%) were also strongly positive. Energy (-3.4%) was the only meaningful detractor as the recent strong rally in oil prices started to plateau.

Outside of the US, most sectors were negative with only Health Care (+0.1%) posting a small gain and Technology essentially flat (-0.0%). Materials (-3.3%) and Financials (-3.0%) led decliners. At the country level, the emerging market crisis was most visible in Turkey (-29.3%), Argentina (-22.2%), Brazil (-11.6%), and South Africa (-10.6%) as each of those markets contended with significant currency declines and investor flight.

Market volatility remained very low as realized and implied volatility measures stayed rooted at the low end of their historical ranges. Trade volumes rebounded from the prior month but were still meaningfully lower than normal. At the factor level, Value, Yield, and Stability were very negative while Momentum and Smaller Size posted modestly positive results. Equal-weighted portfolios underperformed market-cap weighted portfolios again as market leadership continued to be somewhat narrow.

July 2018

Kai W. Hong, CFA
Managing Partner & Chief Investment Strategist

July saw strong performance across most equity markets as concerns over the negative impact of trade wars subsided temporarily. The Russell 3000 Index finished the month with a return of +3.3%. Large cap stocks returned to the fore with the Russell 1000 Index returning +3.5% versus the Russell 2000 Index returning +1.7%. A pause in the rise of the US dollar was helpful to non-US market returns. The developed market MSCI World ex USA Index returned +2.5%, and the developing market MSCI Emerging Markets Index returned +2.2%. Fixed income markets were muted with the Bloomberg Barclays US Aggregate returning +0.0%.

At the Sector level in the US, Producer Durables (+6.1%) and Health Care (+5.9%) were the top performing sectors for the month. Materials (+3.6%), Consumer Staples (+3.5%), and Financials (+3.4%) were also strong performers. While all sectors were positive, Energy (+1.1%) and Consumer Discretionary (+1.1%) were relative laggards.

Outside of the US, Health Care (+4.5%), Utilities (+3.8%), and Financials (+3.5%) led. As in the US, all sectors were positive but Consumer Discretionary (+0.2%) and Technology (+0.5%) were only modestly so. At the country level, emerging markets again dominated the top and bottom performers. Brazil (+11.7%) and Poland (+11.5%) led while Turkey (-7.4%) and China (-2.1%) lagged.

Market volatility remained low as realized and implied volatility measures stayed at the low end of their historical ranges. Trade volumes fell off substantially as many investors remained on the sidelines in the wake of trade and economic uncertainty. At the factor level, Value and Low Volatility were positive while Smaller Size, Quality, and Momentum were modest negatives. Equal-weighted portfolios underperformed market-cap weighted portfolios as market leadership continued to be somewhat concentrated.

June 2018

Kai W. Hong, CFA
Managing Partner & Chief Investment Strategist

Trade tensions were the major driver of many market movements during the quarter with June seeing a sharp escalation in talk and action. In addition to the steel tariffs already implemented, the US announced a further $200 billion in tariffs on Chinese imports were under consideration as well as a potential 20% – 25% levy on European auto shipments. These were met with corresponding measures from the affected counterparties. The initial impact served to weaken overseas markets more with the fallout on US markets muted so far. Central bank policies continued to diverge with the US on course for a bit more incremental tightening while the ECB and the BOJ remained more accommodating. Political uncertainty in Europe and the unpredictable nature of the US administration did not help matters. Oil prices passed $70/barrel, and the US yield curve continued to flatten. Despite this “wall of worry”, investors in US assets appeared fairly sanguine and somewhat risk-seeking rather than risk-averse.

After a mixed start to the year, US markets bounced back to post robust results for the second quarter. The Russell 3000 Index finished the quarter with a return of +3.9%. Small cap stocks were dramatically better with the Russell 2000 Index returning +7.8% versus the Russell 1000 Index returning +3.6%. Returns outside of the US were much weaker as trade concerns and a stronger US dollar weighed on results. The developed market MSCI World ex USA Index returned -0.8%, and the developing market MSCI Emerging Markets Index returned -8.0%. Fixed income markets were relatively quiet with the Bloomberg Barclays US Aggregate returning -0.2%.

In the US at the Sector level, Energy (+13.5%) was the standout sector for the quarter as oil prices rebounded on supply concerns. Returns in Consumer Discretionary (+7.0%) and Technology (+6.2%) were also strongly positive. The more defensive sectors of Consumer Staples (-2.4%) and Producer Durables (-1.8%) were the only negative performers.

Outside of the US, Energy (+7.0%) also led, but most other sectors were negative with Financial Services (-5.2%), Technology (-4.0%), and Utilities (-3.7%) leading decliners. At the country level, the best performers were some of the smaller markets like Argentina (+10.0%), Luxembourg (+6.8%), and Qatar (+6.0%). However, the negative returns in various emerging markets such as Brazil (-28.6%) and Turkey (-24.4%) were much more significant.

Market volatility continued to decline from the more elevated levels of the beginning of the year. Trade volumes increased incrementally but remained well below historical averages. At the factor level, Value was again strongly negative as was Defensive and Low Volatility. Smaller Size and Quality were positive. An equal-weighted portfolio modestly outperformed the market-cap weighted portfolio as market breadth expanded slightly.