IN THIS LIST

U.S. Equities Market Attributes February 2022

U.S. Equities Market Attributes January 2022

S&P Kensho New Economies Commentary: Q4 2021

S&P Latin America Equity Indices Quantitative Analysis Q4 2021

U.S. Equities Market Attributes December 2021

U.S. Equities Market Attributes February 2022

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Howard Silverblatt

Senior Index Analyst, Product Management

KEY HIGHLIGHTS

U.S. Equities Market Attributes February 2022

MARKET SNAPSHOT

S&P 500 performance for February (-3.14%) followed January (-5.67%) on the downside, while the market continued to adjust (reallocate) itself for an expected slower (and more expensive) economy. While the Ukraine situation dominated the moral headlines and wreaked havoc on the market, with a knee-jerk reaction to an expected event, it was the economy that ruled the market. And for February, the economy was defined by increasing inflation stats (7.5% CPI, 9.7% PPI, and 6.1% PCE) and oil's return to USD 100 (last seen in July 2014). More 0.25% interest rate increases are expected at the FOMC meeting on March 15-16, 2022, with a few expecting it to grow to 0.50% (and quantitative tightening to start soon after the meeting). Given current and expected stats, -3.14% (-8.81% from the Jan. 3, 2022, closing high) may not seem bad after a 114% rise from the March 23, 2020, low (41.65% from the pre-COVID-19 Feb. 19, 2020, closing high), especially since there have been no corrections since the March 2020 low. What was keeping the market up and countering the fears around inflation and the Russia-Ukraine conflict, was strong U.S. economic fundamentals) that point to growth, as demonstrated by wealth (home and equity values), consumer spending, employment (4.0% unemployment) and labor demand, wage growth (5.7%), and expected record growth in earnings (8.7% for 2022 and 9.6% for 2023). Inflows continued to play a strong supporting role, with a returning cameo appearance from “buy the dips". As for March, developing issues around the Russia-Ukraine conflict could have a major impact, and any escalation would affect the markets. At this point, however, the market appears to have accepted the situation (even as it continues to refine its reallocations) and focused on “home" issues, leaving inflation costs and its impact on growth as potentially the major March issues (meaning that issues that can demonstrate their ability to cope with higher prices should do better).

Historically, February gains 53.8% of the time, with an average gain of 2.88% for the up months, a 3.46% average decrease for the down months, and an overall average decrease of 0.05%. For February 2022, the S&P 500 was down 3.14%, trading in correction territory but not closing there. In the forward March month, historically, the index posts gains 60.6% of the time, with an average gain of 3.34% for the up months, a 3.85% average decrease for the down months, and an overall average increase of 0.51%.

The S&P 500 closed at 4,373.94, down 3.14% (-2.99% with dividends) from last month's 4,515.55 close, when the index was down 5.26% (-5.17%), and from December's close of 4,766.18, when it was up 4.36% (4.48%). The YTD return was -8.23% (-8.01%), the three-month return was -4.23% (-3.89%), and the one-year return was 14.77% (16.39%), with the index up 29.17% (33.40%) from its pre-COVID 19 Feb. 19, 2020, closing high. The Dow® ended the month at 33,892.60, down 3.53% (-3.29% with dividends) from last month's close of 35,131.86, when it was down 3.32% (-3.24%) from the prior month's close of 36,338.30, when it was up 5.38% (5.53%). The YTD was down 6.73% (-6.43%), the three-month return was down 1.71% (-1.25%), and the one-year return was up 9.57% (11.59%).

Hopefully, the saying, "So goes January, so goes the year," is not true, but for this year, “So goes January, so goes February" was. After the new year opened with a new closing high (Jan. 3. 2022; 4,796.56), it was all downhill, both for January (-5.26%) and February (-3.14%). The S&P 500 switched from 15 months of posting at least one new closing high (starting November 2020) to posting its first official correction (Feb. 23, 2022; 4,225.50, -11.91%) since Feb. 27, 2020, which ended as a bear market, with a 33.93% decline.

Last month's loss was blamed mostly on inflation, as it overtook COVID-19 on the concern list. For most of this month, global conflict replaced inflation (through the correction entry), but inflation (costs of materials, labor, pass-throughs, etc.) fought back, as month's end found it slightly beating out secondplace global conflict, with COVID-19 a distant third. Going into March, inflation appears to hold the edge for concern, as the Fed's March 15-16, 2022, meeting is expected to take the winner's 0.25% increase over the feared 0.50%.

February posted no new S&P 500 closing highs, an event not seen since October 2020, as momentum stopped. The index closed up 29.17% (33.40%) from its pre-COVID-19 Feb. 19, 2020, closing high (90 new closing highs). Since Biden won the Nov. 3, 2020, U.S. election, the market has gained 29.82% (32.38%), with 69 closing highs since his Jan. 20, 2021, inauguration. The bull market was up 95.49% (101.48%) from the low on March 23, 2020. The index closed 8.81% lower than its Jan. 3, 2022, 4,796.56 closing high, and down 8.23% YTD.


U.S. Equities Market Attributes January 2022

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Howard Silverblatt

Senior Index Analyst, Product Management

KEY HIGHLIGHTS

U.S. Equities Market Attributes January 2022

MARKET SNAPSHOT

"So goes January, so goes the year" is true for the S&P 500 70.97% of the time (since 1926), but it has not worked for the past two years, and it has been true 50% of the time over the past 10 years. For this January, the index declined 5.26%. During the month, it reached -11.40%, surpassing the worst January in history, 2009's 9.87% decline (2009 went on to post a 23.45% gain), but it recovered over half of that level by month-end. As for volatility, the average daily high/low spread was 2.06% (Jan. 24, 2022, was 4.61%), compared with 2021's 0.97%, with 7 of the 20 days declining at least 1% and 2 up that amount.

Volatility returned with a vengeance, as the bond vigilantes failed to dominate (although they did make an appearance), and intraday swings returned (average daily was 2.06% compared with 0.78% for January 2021) to make or "broke" day traders, who were willing to pay a high premium for option strategies. Trading imbalances were plentiful (but with few non-guidance-related ones). Reallocation and shifts to value from growth, some selective profit taking (that the market didn't already adjust for), and selling overpowering buying are the market's ways of claiming that the decline is temporary (although no one dared use the word "transitory"). For the month, the S&P 500 crossed the correction point intraday, down 11.97% on Jan. 24, 2022, from the January closing high), though it never closed there, and closing prices are the index's measurement for bull and bear classification. Inflation was the main concern, as the stats (CPI, PPI, PCE, etc.) pointed to more inflation for 2022, with hope for better stats at year-end. The higher inflation fears translated to market action via stocks being more susceptible to interest rates (both higher and lower) and expected consumer pull back, which could affect the economy. Some spoke of the Fed's preference for interest rate hikes (five expected, with some speculating on a 0.50% one) without balance sheet action, as the feared issue would be an inverted yield curve, resulting in the use of the word "recession" (banned in some areas). Eventually regressions tend to return, now or later, but the concern now is whether a shaky landing (few see a soft one) is viable, but this may only be possible if consumers continue to spend and companies are able to continue to pass along costs (which could be helped by the continuance of supply issues). 


S&P Kensho New Economies Commentary: Q4 2021

TOP THREE FROM ACROSS THE NEW ECONOMIES

Virtual Reality (10.8%):Facebook started a global metaverse fever by rebranding and shifting financial focus to Meta in late October 2021. In essence, a metaverse encompasses a network of 3D virtual spaces, often accessed through virtual reality or augmented reality. Riding this wave, virtual reality rose to the best-performing subsector in Q4 2021. Chipmakers benefited from the accelerated demand for semiconductor chips, becoming the key performance driver for the virtual reality subsector. Shares of Synaptics Inc. soared, with strong consecutive quarterly revenue growth, thanks to its successful business shift from smartphone chips to the Internet of Things (IoT). Himax Technologies, a leading display driver maker, posted impressive Q4 revenue and earnings. Investors have piled into Nvidia to take advantage of various technology trends such as video gaming, self-driving cars, and the metaverse.

Autonomous Vehicles (8.2%):While supply chain issues brought on by COVID-19 remain, electric car manufacturers achieved an impressive number of car deliveries. XPeng, Ford, and Tesla all delivered a strong performance, posting nearly a triple-digit year-over-year growth in deliveries this quarter. Semiconductor suppliers, such as On Semiconductor, Nvidia, and Ambarella were also among the top contributors, thanks to their vital position in various technology trends.

Cyber Security (8.0%):Tailwinds from the ongoing digital transformation, increased focus on online security, and remote work continued to support the demand for next generation security. The draw of metaverse has ignited the investors' appetite for network stocks. Limelight Networks, Broadcom, and Juniper Networks were the top three contributors this quarter. Despite disappointing numbers across the previous five quarters, Limelight Networks attracted much interest over strong viewership in the media streaming sector. Broadcom announced better-than-expected fiscal Q4 results, with the approval of a USD 10 billion stock buyback plan. Juniper Networks is well positioned as a leading provider of networking solutions.

BOTTOM THREE FROM ACROSS THE NEW ECONOMIES

Digital Communities (-14.9%):With the gradual reopening of the global economy and growing supply chain issues, Digital Communities posted a poor performance in Q4. The biggest contributor to this underperformance was iQIYI. In addition to the pressure from China's tightening of the regulatory environment for tech companies, iQIYI's advertising revenue along with its number of subscribers declined over the past three consecutive quarters; its stock price dropped by 43% in Q4. Snap dropped 36% due to its disappointing earnings report, as well as its new user privacy protection initiative that prevents third parties from collecting user data for advertisement targeting. Another notable underperformance was Vimeo, whose forward guidance for 2022 was below the market's expectations.

Alternative Finance (-16.6%):Cryptocurrency Q4 performance was volatile, with lackluster net gains. In October, Robinhood's reported revenue declined by 35% since the prior quarter, dragged lower by the slowdown in crypto trading. Its stock price crashed by 58%. In an uncertain macroeconomic environment, investors have curtailed their expectations about financial lending services and payment systems, which saw Upstart Holdings and Paysafe to decline by nearly 50% in Q4.

Distributed Ledger (-16.6%):Along with cryptocurrencies, Distributed Ledger experienced a harsh winter in Q4. With the risk of persistently high inflation and potential Fed rate hikes in the background, as well as the constant battle between regulation and the market, companies like GreenBox, Ebang International, and OneConnect Financial Technology dropped between 40% and 50% in Q4. The biggest underperformer, SOS Limited, was down by 61% due to its USD 90 million of new stock offerings in November, which presented a negative signal to the market.


S&P Latin America Equity Indices Quantitative Analysis Q4 2021

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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: Q4 2021

2021 started on a hopeful note, with COVID-19 vaccines coming to save the world. However, as in many other parts of the world, Latin American countries struggled to control the pandemic’s impact on their economies and societies. Additionally, political uncertainty and civil unrest in several countries contributed to a disappointing year.

While most global markets experienced strong performance in 2021, the S&P Latin America BMI finished the year down 12%, with negative returns in three out of four quarters. It is interesting to note, however, that Latin America excluding Brazil had a different outcome, as the S&P MILA Pacific Alliance Composite gained 6.7% for the year.

While headline indices from Argentina, Chile, Colombia, and Peru all closed 2021 in positive territory in local currencies, Mexico was the standout performer among Latin American countries as the S&P/BMV IRT gained 24.4% YTD. The story was different in U.S. dollar terms, as all markets except for Argentina and Mexico ended in the red due to local currency depreciation against the U.S. dollar.

Brazil was the worst performer in 2021 in both Brazilian reals and U.S. dollars. Most Brazilian sectors underperformed; Financials, represented by the S&P Brazil BMI Financials Index (-24.3%), had significant losses and the greatest impact on the entire market. Mexico, on the other hand, had the largest annual gain since 2009, as shown by the S&P/BMV IRT. Most of this was driven by the double-digit gains of some of the largest Mexican companies like America Movil, Cemex, and Walmart de Mexico.

In terms of regional sectors, nearly all of them struggled to stay afloat. In the end, for 2021, Communication Services (19.2% YTD), Consumer Staples (5.7% YTD), Energy (10% YTD), and Materials (3.1% YTD) were the only ones that accomplished that goal. The pandemic drove most people indoors to work, play, and shop. In Communication Services, companies like America Movil, Grupo Televisa, and Telefonica Brasil greatly benefited from increased subscribers to their online and pay TV services. Energy was driven up by solid annual price performances from Petrobras and Ecopetrol, which represented nearly 77% of the Energy sector. Consumer Staples, typically a reliable defensive sector, did not disappoint. Finally, Materials companies, which include producers of building materials, benefited from high demand for their products. Likewise, mining companies, particularly copper exporters, gained from historically high prices for their exports in 2021. On the downside, Financials, the largest sector in the region, was down 21.6% for the year. Brazilian financial institutions, representing 64% of the sector, had the most losses for the year, greatly contributing to the region’s disappointing returns.

As the COVID-19 pandemic continues to evolve, uncertainty envelops the region at the start of 2022. High inflation, weakness in local labor markets, expectations for rising interest rates, and political instability in several Latin American countries continue to weigh on equity market sentiment. All this points to what could be a significant shift in economic and governmental policies in 2022. For better or for worse, it promises to be another fascinating year.


U.S. Equities Market Attributes December 2021

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Howard Silverblatt

Senior Index Analyst, Product Management

KEY HIGHLIGHTS

U.S. Equities Market Attributes December 2021

MARKET SNAPSHOT

As for the year that was—it was, posting a broad 26.89% gain (28.71% with dividends), and 434 issues gained for the year, as 96 gained over 50% and 7 declined at least 25%.  All 11 sectors posted double-digit gains (7 gained last year, with 5 in the double digits).  COVID-19 continued to dominate the news, as the vaccines (and now the boosters) permitted Americans to spend more outside.  But it was spending inside, especially via e-commerce, that permitted record earnings, sales, and margins for the S&P 500, as consumer wealth shot up (via equities and home ownership, as well as lower spending), and confinement seemed to boost spending.

Also supporting the economy was a friendly Fed, which kept rates near zero.  While bond buying support is expected to end in March 2022, and rates are likely to rise (first increase potentially in June 2022), even with three increases (of 0.25% each), rates would remain low and therefore supportive.  Inflation, however, may be a different issue.  While the supply shortage is expected to ease, labor shortages (or “displacements”—the new term that has emerged) may be harder to resolve.  Telecommuting has also added to the labor change, as it started growing pre-COVID-19 and is now in full swing, with most offices still more empty than full.  Still, optimism prevails, as money flowed into the market (which helps to keep nervous money managers in), and the S&P 500 posted new closing highs (70 for the S&P 500 in 2021, ranking second only to 1995’s 77), as the “don’t fight the Fed” saying changed to “don’t fight the flow” (for a while it was “don’t fight the FT—the Fed and the Treasury).


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