Markets Rebound as Tariff Tensions Ease, but Consumer Confidence Sinks

Market Summary

US Market: 4/18/2025 - 4/24/2025

• U.S. stock markets experienced a significant rebound this week, with the S&P 500 exiting correction territory after President Trump softened his criticism of Federal Reserve Chair Jerome Powell and gave hope to trade agreements. This reversal restored investor confidence, leading to a recovery of over $4 trillion in market capitalization, and underscores the profound impact of policy decisions on investor sentiment.
• The bond market exhibited continued volatility, with the 10-year Treasury yield nearing 4.25%, signaling continued concerns about a potential economic slowdown. The movement reflects the market's sensitivity to fiscal policies and the broader economic outlook as rising yields can increase borrowing costs and crimp rich equity valuations.
• Despite improving from last month, Consumer confidence in the U.S. has dropped to near-record lows driven by concerns over inflation and economic slowdown caused by escalating trade tensions with China. A University of Michigan survey reported a 32% decline in economic expectations since January, marking the steepest drop since the 1990s recession. Continued slowing in confidence can lead to reduced spending, potentially further slowing economic growth.

Extreme Movers Portfolio Performance

Note: Extreme Movers definitions can be found in the Factor University section on our website.

US Extreme Moves Volatility and Factor-Driven Speedometers

• The US Extreme Movers portfolio saw a 14.4% return this week, ranking in the 43rd percentile for the trailing twelve months (TTM) and the 63rd percentile since inception. This level of performance marks the week as being “Volatile”. The divergence in the TTM and since-inception percentiles indicates the elevated levels of volatility the market has seen in the past year.
• Factors accounted for 22% of the total return, placing the portfolio in the “Neutral” category. This ranks in the 78th percentile for the trailing twelve months and the 65th percentile since inception. Industry factors drove two thirds of the total factor return.

International Extreme Movers Volatility and Factor-Driven Speedometers (13.3% Calm, 27.3% Neutral)

• The International Extreme Movers portfolio earned a 13.3% return, placing it in the "Calm" category as well for the week. This return ranks in the 63rd percentile over the trailing twelve months and the 67th since inception.
• Factors accounted for 27.3% of the total return, which classifies as “Neutral". This level of factor return is in the 80th percentile for the portfolio over the trailing twelve months and the 75th since inception. Country and Industry factors drove almost 80% of the total factor return.

US Extreme Movers Portfolio Exposures

• Reverting from last week’s position as the worst sector, Consumer Discretionary held the largest allocation in the U.S. portfolio this week at 18%, ranking it in the 91st percentile on a trailing-twelve-month basis and in the 92nd percentile since the portfolio’s inception. Hotels, Restaurants, & Leisure along with Household Durables were the primary contributors, accounting for 6% and 5% of the allocation, respectively.
• Information Technology also saw a significant shift, jumping up to a 6% allocation compared to last week’s -23%. This move placed the sector in the 62nd percentile on a trailing twelve-month basis and the 59th percentile since inception. Electronic Equipment and Semiconductors were the main drivers, while IT Services and Communications Equipment remained negative.
• Industrials was the bottom sector this week with a -11% allocation that placed in the 18th percentile over the trailing-twelve-months and the 11th percentile since the portfolio’s inception. Aerospace & Defense was the main driver at -7%.

• Beta and Volatility factors were back in favor this week, with all three Beta factors placing above the 90th percentile both TTM and ITD. Both the long and short books contributed strongly to the positive Beta, as investors bought high-beta names and shorted anti-beta names. Volatility was driven primarily by the long book.
• Quality factors were out of favor this week, with most factors ranking in the first quartile on a TTM and ITD basis. Earnings Quality and Profitability were driven by the long book, as investors bought low-quality names, while Management Quality was driven by the short book, where investors sold higher-quality names.
• Interest Rate Beta flipped from last week’s exposure, placing in the 75th percentile TTM. This and was driven primarily by the long book. HF Crowding and Short Interest factors were also both positive, with the former and latter being long-driven. This implies that investors leaned into popular longs, while also buying up popular shorts.

International Extreme Movers Portfolio Exposures

• Mirroring the US portfolio, Consumer Discretionary was the top sector this week, with a 7% allocation that placed in the 82nd percentile on a trailing-twelve-month basis and the 80th percentile since inception. Broadline Retail and Automobiles were the main contributors at 3% each.
• Financials ranked second this week, also at 7%, which placed the sector in the 56th percentile TTM and 68th percentile ITD. Capital Markets and Banks were the drivers at 4% each, while Insurance was the only negative industry contributor at -1%.
• Materials was the bottom sector this week with a -9% allocation. This placed in the 16th percentile TTM and the 22nd percentile ITD. All industries within the sector contributed to the negative allocation, with Metals & Mining leading the group at -5%.

• Beta and Volatility factors in favor, with both beta factors ranking above the 90th percentile TTM. Axioma’s positive Market Sensitivity was driven by both sides of the book, while Barra’s beta factor suggested that the strong exposure was due almost entirely to investors shorting anti-beta names. Both models concurred that Volatility was driven by the longs.
• Growth was strongly in favor in the International portfolio, with both factors ranking the top decile, and Barra’s factor in particular reaching its top exposure in the trailing-twelve-months. This was driven largely by longs, though as investors flocked to high-growth names, while also shorting low-growth names.
• Oil Beta saw a resurgence this week, landing in the 90th percentile TTM as investors flocked to high-oil beta names. HF Crowding was also positive, though it was driven by the short book, suggesting that investors sold uncrowded names. Short Interest was particularly negative, reaching the bottom quintile TTM and ITD, as investors sold popular shorts and bought unpopular shorts.

International Extreme Movers Portfolio Country Exposures

This chart presents the portfolio's exposures to various groups in the Developed and Emerging Markets, highlighting the three most notable country contributors for each respective group's allocation.

• Emerging Markets were in favor this week, with an 8% allocation, placing the region in the 64th percentile for the trailing twelve months and the 60th percentile since the portfolio’s inception. In contrast, Developed Markets had a -8% allocation, which placed them in the 25th percentile for the trailing twelve months and 31st percentile since inception.
• In Emerging Markets, the Americas excelled with a 20% allocation that was driven by Mexico and Brazil and placed the region in the top decile both TTM and ITD. In contrast, Europe, the Middle East, and Africa saw a -12% allocation. Saudi Arabia was the most significant contributor, accounting for -8% of the allocation, and placing in the 2nd percentile for the trailing twelve months.
• Within Developed Markets, the Europe & Middle East was the largest driver with a -12% allocation. Switzerland was the main country driver, reaching its lowest allocation in the portfolio over the trailing twelve months.

Regards,

Reshma