Throughout 2021, we’ve explored a variety of macroeconomic influences on equity risk and performance, from interest rates to inflation, commodities, and more. Of course, the magnitude of the macro role in equity markets fluctuates over time but, for many, it has felt as though macroeconomic factors have been a massive driver of performance for nearly two years running. As a result, as fundamental managers continue to explore the macro risks in their strategies, they raise two key questions: Where is macro dictating returns, and where is the alpha?

To help answer these questions, we will be leveraging specialized macro datasets from our partners at Quant Insight.

Months after the “Meme Stock” and retail events of early 2021, fears of short squeezes resulting in massive losses are still very much on investors’ minds. Crowding among particular industries and individual stocks, combined with continued market volatility and increased retail investing, has maintained the conditions that have allowed more and more squeeze events to occur.

In last week’s Factor Spotlight, we revisited the Growth vs. Value debate. We highlighted the factor and sector drivers that characterized the 2021 rotation that has seen Growth fall out of favor and Value come back into style. Of course, the Growth vs. Value story has been a prevalent story for investors for quite some time, but why is it necessary to consider these themes today?

Before we kick off, I wanted to let you know that the latest issue of Regius Magazine features an article from Omega Point on “Improving Tax-Aware Performance Through Better Substitutions.” You can find us on p.74, and I encourage you to check out the rest of the excellent coverage, which focuses on Crypto, ESG, and Sustainability.

The last two times we highlighted the relationship between Growth and Value, we noted the heavy influences of Market Sensitivity, Volatility, and Interest Rate Beta in driving risks and performances of the two market segments. Since then, the DNA of these influential factors has evolved, tossing Growth and Value in different directions. To add to the chaos, the Momentum Rotation in March provided its own systematic shake-up, forcing investors to grapple with just how much exposure they’re willing to take on in Growth and Value factors.

The Momentum factor tends to be top-of-mind for factor practitioners in all markets, but it has been particularly tough to take the eye off of Momentum in 2021. The last time we spotlighted Momentum, we pointed to the beginning of a transition in the makeup and characteristics of Momentum stocks. Because Medium-Term Momentum is typically a measure of a stock’s trailing twelve-month return, excluding the most recent month, we saw a seismic shift in Momentum leadership after the March 2020 downturn escaped the lookback window. This leadership change, along with a robust Q3 factor rally, has left many managers looking for answers.