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U.S. Equities Market Attributes January 2023

S&P Latin America Equity Indices Quantitative Analysis Q4 2022

S&P Kensho New Economies Commentary: Q4 2022

iBoxx Tadawul SAR Government Sukuk Indices – Q4 2022

iBoxx Tadawul SAR Government Sukuk Indices – Q4 2022

U.S. Equities Market Attributes January 2023

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Howard Silverblatt

Senior Index Analyst, Product Management

Key Highlights


- The S&P 500® was up 6.18% in January, bringing its one-year return to -9.72%.
- The Dow Jones Industrial Average® gained 2.83% for the month and was down 2.98% for the one-year period.
- The S&P MidCap 400® increased 9.14% for the month, bringing its one-year return to 0.65%.
- The S&P SmallCap 600® was up 9.40% in January and had a one-year return of -2.53%.

U.S. Equities Market Attributes January 2023: Exhibit 1

Market Snapshot

This month's Q4 2022 earnings releases demonstrated that following the money (starting with earnings and then cash flow) always seems right, especially if you are paying bills (payroll, CapEx, dividends and buybacks). While the actual Q4 bottom-line results weren't good, they weren't as bad as some feared; the quarter is expected to end 2.7% above Q3 2022 (which would still be down 8.8% from the record Q4 2021, when the S&P 500 closed the year at 4,766). The actual top-line results (sales) showed a slowing of the ability of companies to pass along higher costs (with some extra profit included), as sales for the quarter are expected to be a tick higher (0.9%) than the record Q3 2022 (when consumers were willing to pay more, or "revenge spending" as it's now labeled).

Along with the relatively decent numbers were numerous warnings from CEOs of harder times, squeezed margins (which at 11.48% for Q4 2022 remain significantly higher than the historical 8.29% average since 1993) and consumer pullbacks. Joining CEO commentaries was the lack of long-term pessimism and the belief that they could pull through the current downturn, all of which has pushed the market into the belief of two more FOMC increases of 0.25% each, even as U.S. Fed comments remain a bit more hawkish. The resulting belief was that the sun will come out (in the second half), as the S&P 500 posted its first January gain after three years of declines (up 6.18% this January, compared with -5.26% for January 2022, -1.11% for 2021 and -0.16% for 2020). And a happy January tends to make for a happy year, as "so goes January, so goes the year" has historically been correct 71% of the time.

While Santa Claus didn't show up for Christmas, the benevolent being did make a welcome appearance in January, as the S&P 500 closed at 4,076.60, up 6.18% (6.28% with dividends) from last month's close of 3,839.50, when it was down 5.90% (-5.76%) from November's close of 4,080.11 (5.38%, 5.59%), and October's close of 3,871.98 (7.79%, 8.10%). It was the first January gain after three years of January declines. While the start (and January barometer indicator) was appreciated, the index still had a long way to go to make up for last year's decline. The three-month period posted a gain of 5.28% (5.76%), while the one-year return was -9.72% (-8.22%), the 2022 return was -19.44% (-18.11%). The Dow® ended the month at 34,086.04, up 2.83% (2.93% with dividends) from last month's close of 33,203.93, when it was down 4.17% (-4.09%) from November's close of 34,589.77, when it was up 5.67% (6.04%). The Dow® was down 7.37% from its Jan. 4, 2022, closing high (of 36,799.65). The three-month return was 4.13% (4.68%) (2022 return was -8.78%; -6.86%), while the one-year return was -2.98% (-0.92%).

For January, 8 of the 11 S&P 500 sectors were up (compared with December 2022, when all 11 declined), with Consumer Discretionary doing the best, up 14.99% (after last year's 37.58% decline), and Utilities doing the worst, down 2.04% (after 2022's mild 1.44% decline). On an aggregate basis, the S&P 500 increased USD 1.981 trillion (to USD 34.114 trillion) for the month, while it declined USD 8.224 trillion for 2022. It was up USD 6.050 trillion from the Feb. 19, 2020, start of the COVID-19 pandemic.

For Q4 2022, 170 issues have reported (44.4% of the market value), with 119 (70.0%) of them beating on earnings and 107 of 169 (63.3%) beating on sales. For Q4 2022, earnings are expected to post a 2.7% gain over Q3 2022 and be down 8.8% over Q4 2021. Sales were expected to be up a tick (0.9%) from the record Q3 2022 level (and potentially set a new record) and up 6.5% over Q4 2022. Operating margins for Q4 2022 were expected to be 11.48%, up from 11.28% in Q3 2022 (the average since 1993 was 8.29%, and the record is 13.54% in Q2 2021). Significant EPS impact due to share count reduction for Q4 2022 was posted by 21.40% of the issues, compared with Q3 2021's 21.24%, 14.89% in Q4 2021 and Q4 2020's COVID-19-inspired 6.01%. For fiscal-year 2022, earnings are expected to decline 4.8%, with a P/E of 20.6. For 2023, estimates call for a 11.9% increase, as the forward P/E is 18.4.

S&P Latin America Equity Indices Quantitative Analysis Q4 2022

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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 2022

Despite a difficult year for most global equity markets, the S&P Latin America BMI gained 4.9% in 2022, and it was the only major regional equity market to close the year in positive territory. This marked a stark reversal from 2021, when Latin American equities were the sole region in the red, while the S&P 500® and several other regional equity markets hit record highs.

While most equity markets were hampered by rising interest rates, recession concerns and a steep decline in Information Technology and other growth-oriented stocks, Latin American equities benefited from high exposure to commodities and limited exposure to Information Technology, along with currency strength versus the U.S. dollar.

On a quarterly basis, global regions struggled throughout the year. Latin America, on the other hand, was up three of the four quarters, as shown by the performance of the S&P Latin America BMI.

A closer look at the main country indices shows that Argentina’s S&P MERVAL (ARS) posted the largest gains for Q4 (45.3%) and YTD (142.0%). However, these returns are reflective of the country’s high inflation rate. Focusing on the emerging markets in the region, Chile was the top performer in 2022, as reflected by the S&P IPSA, driven mainly by its exposure to mining, which kept it in positive territory in Q2 (while other regions posted losses in that period). Peru and Colombia, despite recent political instability with newer elected governments, ended the year losing a mere 2% each. The largest markets in the region, Brazil and Mexico, both had their ups and downs; in the end, Brazil was able to generate higher returns, driven by its mining and oil & gas companies, helping the S&P Brazil LargeMidCap Index (BRL) gain 3.5%, while Mexico’s S&P/BMV IRT (MXN) was down 5.7% for the year.

Sector analysis shows that the one-year returns were mixed. The rise in oil prices drove the Energy sector (41.2%) to outperform. Other top performers among the S&P Latin America BMI sectors were Real Estate (16.3%) and Utilities (14.5%), however Financials (8.8%) and Materials (9.1%), which are represented by the largest companies in the region, had the greatest contribution to returns after Energy.

2023 started with new visions and expectations for the region. New leadership in Brazil, Chile, Colombia and Peru will likely bring significant shifts in economic and governmental policies in 2023. The region is also preparing for what may be a difficult year, as echoes of a global recession weigh on equity market sentiment. Will Latin America continue to outperform? It will be interesting to see how the region navigates through economic, political, and public health care uncertainties.

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S&P Kensho New Economies Commentary: Q4 2022

The S&P Kensho New Economy Indices seek to track the industries and innovation of the Fourth Industrial Revolution

The last quarter of 2022 saw U.S. equities rebound from their YTD lows as inflation prints started to cool.  While the Fed has not relented on its hawkish stance, despite multiple forward-looking indicators pointing to a recession ahead, wages have provided a sturdy support to consumer spending on goods and services.  Additionally, the uncertainty at the start of the Q4 over the U.S. mid-term elections also dissipated.  Notwithstanding its weakest annual return (-18%) since 2008, the S&P 500® posted its first positive (7.6%) quarterly return of 2022.  Market strength was broad based, with 10 of the GICS® sectors contributing positively to the overall S&P 500 quarterly performance.  From a style perspective, value continued its outperformance versus growth in Q4, ending 2022 with the largest outperformance in nearly two decades.  Most S&P 500 Factor Indices posted positive quarterly performance, from defensive-tilted low volatility and quality factors, along with more cyclical high beta and growth factors.  Within the S&P Kensho New Economies, 15 of the 25 subsectors had positive quarterly returns, the most since Q2 2021.  Given the sanguine performance of U.S. factors, positive exposure to volatility and growth factors was not as detrimental during this quarter as it was in the prior three quarters.

In contrast to the equity and bond markets’ weakness, U.S. Dollar strength has extended into Q3 2022, becoming the longest USD strengthening cycle in its history. The knock-on effects of a stronger dollar have exacerbated the drawdowns (in USD terms) among emerging market equities and have likely influenced their central banks’ fiscal policies. Overall, the macro environment (core rates, oil and inflation, among others) appears to be dictating the markets’ near-term risk appetite. The impact on global energy prices from the ongoing Russia-Ukraine conflict remains in focus, as energy-related themes posted another strong quarterly performance.

Top Three from across the New Economies

Space (18.5%): KMARS, which is primarily composed of Aerospace & Defense sub-industry firms (nearly 58% of the index), posted its best quarterly performance since Q4 2020.  The rally was broad, with 29 of the 34 constituents contributing positively to the index performance.  Maxar was the top performer (176%), largely owing to a positive reaction to news that Advent International would be taking the company private after a buyout involving a significant premium (link).  Boeing was another notable performer this quarter (57%), becoming one of the top three best-performing stocks within the S&P 500.  Continued recovery in the air travel industry and robust delivery numbers helped turn the sentiment around Boeing, as it recovered from a four-year low at the beginning of the quarter.  Virgin Galactic topped the underperformers list (-26%), extending its downtrend for the sixth consecutive quarter and reaching a historic low.  The company’s plans for space travel have been delayed, adding to the cash burn, and reporting a Q3 2022 revenue of less than USD 1 million.  After a flurry of SPAC activity in the Space arena, 2022 was a year of consolidation and competition that hopefully will drive the next leg of innovation in this area.  The index’s heavy weight toward defense firms also reflects rising national security interests forming a key support for this industry.

Robotics (16.4%): KBOTS had its best quarterly performance in two years, aided by positive performance from 27 of its 35 constituents.  Its fourth quarter recovery was strong after ending the previous quarter near a two-year low.  Oceaneering Intl., the only stock in the index from the Energy sector (best-performing sector within S&P 500 in 4 2022), was the top contributor after gaining 120% in the final quarter, of which 57% was in the last two weeks of October near the Q3 earnings release (link).  The company, in addition to its deep-sea drilling activities, is also involved in defense contracts supporting the U.S. Navy.  The biggest index underperformer was Omnicell, a pharmacy inventory management company, which suffered after reporting weak Q3 numbers that have slowed down from their COVID-era forecasts.  The index recouped the previous quarter’s loss this quarter but ended the year down (-22%).  With a balanced exposure to defensive Health Care Equipment and the more cyclical Industrial Machinery and Life Sciences Tools & Services, the index was less volatile this quarter than most of the other Kensho subsectors.

iBoxx Tadawul SAR Government Sukuk Indices – Q4 2022

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Paulina Lichwa-Garcia

Associate Director, Fixed Income Indices

S&P Dow Jones Indices

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Florian Guth

Principal, Fixed Income Indices

S&P Dow Jones Indices

iBoxx Tadawul SAR Government Sukuk Index

The iBoxx Tadawul SAR Government Sukuk Index total return level declined over the course of 2022, in line with other bond markets, which all were under pressure throughout the year.  The index touched its low point at the end of October, falling under 99 for two days.  Toward the end of the year, the levels recovered, but annual yields have stayed elevated even at the end of 2022, as countries’ interest rates rose, following increases by the U.S. Federal Reserve.  Meanwhile, index duration plunged (see Exhibit 4), with subdued new debt issuance.

Exhibit 1: Total Return of the iBoxx Tadawul SAR Government Sukuk Index

Exhibit 2: Total Return by Maturity

Exhibit 3: Key Analytics of the iBoxx Tadawul SAR Government Sukuk Index

Exhibit 4: Key Analytics of the iBoxx Tadawul SAR Government Sukuk Index

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iBoxx Tadawul SAR Government Sukuk Indices – Q4 2022

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Paulina Lichwa-Garcia

Associate Director, Fixed Income Indices

S&P Dow Jones Indices

iBoxx Tadawul SAR Government Sukuk Index

The iBoxx Tadawul SAR Government Sukuk Index total return level declined over the course of 2022, in line with other bond markets, which all were under pressure throughout the year.  The index touched its low point at the end of October, falling under 99 for two days.  Toward the end of the year, the levels recovered, but annual yields have stayed elevated even at the end of 2022, as countries’ interest rates rose, following increases by the U.S. Federal Reserve.  Meanwhile, index duration plunged (see Exhibit 4), with subdued new debt issuance.

iBoxx Tadawul SAR Government Sukuk Indices: Exhibit 1

iBoxx Tadawul SAR Government Sukuk Indices: Exhibit 2

iBoxx Tadawul SAR Government Sukuk Indices: Exhibit 3

iBoxx Tadawul SAR Government Sukuk Indices: Exhibit 4

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