The FT Wilshire 5000 has witnessed the largest drawdown of 2023 after declining –9.1% from the 31 July high.
FT Wilshire US Small Cap has lagged hit by large declines in health care, industrials and resources. Value has matched growth returns.
Technology has continued to lose momentum on rising bond yields. The sector has been the biggest drag on 3 month returns for the FT Wilshire 5000 index.
Energy and digital info outperformed over 3 months amongst negative returns across all sectors. Transportation and real estate have underperformed and seen significant declines.
Sector weighted contributions blend sector performance with sector weighting to establish aggregate return drivers. Despite not being the weakest performers health care and technology were the largest negative contributors to 3 month returns. Technology and Digital Info remain the dominant contributors to YTD returns.
Small cap has continued to lose ground on a relative basis, underperforming in October and over the last 3 months. Value has matched the returns of growth in recent months, however growth remains the standout performer YTD, outperforming value by 25.8%.
Growth has delivered a 5yr annualized return of 14.0% vs a value return of 8.1%.
Our “Pure Factors” are designed to eliminate the unintended sector and factor exposures incorporated into most conventional factor methodologies. In this regard they are designed to deliver “pure” factor premia.
Pure Beta has outperformed over 3 months with Pure Size lagging. Year to date, Pure Quality has significantly underperformed Growth Style and Pure Value has outperformed Style Value.
Pure Quality remains the strongest performer over the past 12 months.
Europe ex UK and China continue to lose further ground on a relative basis over the last 3 months.
Rising bond yields and geopolitical tensions drive global equity market correction.
Large FX moves (most notably Yen weakness) has created significant differences in YTD returns when measuring the performance in LCY vs USD.
US vs Global ex US sector returns and sector-weighted contribution analysis: The superior positive contribution from technology and digital information remain the key drivers of US outperformance vs Global ex US YTD, more than offsetting the negative contributions from health care, financials and energy.
Positive Japanese financials returns a standout amongst widespread declines over 3 months. Japan also saw outperformance from its relatively large transportation sector (12.6% weighting vs 3.7% in the US).
Gold and oil both rise on heightened geopolitical concerns in October. Gold testing key $2,000 resistance level.
Both US and non-US REITs saw double-digit declines over 3 months, hit by the backdrop of rising US bond yields. Within the US self-storage and office sectors were the worst performers.
Wilshire Liquid Alternative indexes benefitted from the volatility and decline in equity markets over the last three months, with Global Macro and Event Driven indexes posting modest positive returns.
The FT Wilshire Digital Assets Index has seen strong returns, rising 23.8% in October and delivering a return of 12.7% over the last 3 months.
The recent slew of better than expected high frequency US data (including September’s strong US retail sales) has driven the upgrades to consensus 2023 forecasts but lower growth is forecast for 2024.
Both consensus and central banks are currently expecting regional inflation levels to fall back towards pre Covid levels by the end of next year. In the US Services disinflation is now needed to see another leg down in market inflation expectations.
Small cap has continued to lose ground on a relative basis, underperforming in October and over the last 3 months. Value has matched the returns of growth in recent months, however growth remains the standout performer YTD, outperforming value by 25.8%.
Growth has delivered a 5yr annualized return of 14.0% vs a value return of 8.1%.
Markets are now expecting a slower tempo to the decline in US interest rates in 2024 (c60bps now vs 120bps three months ago).
Consensus US 2024 GDP forecasts dipped as 2024 rate expectations ratcheted higher from the lows in March
Having fallen from restrictive into neutral in the first half of the year, our US Financial Conditions Indicator(FCI) has tightened back towards the highs seen last November.
Markets have seen a modest de-rating from the highs in July led by the US. Valuations remain well below their 2021 peaks.
From the 2021 peak the US has seen a benign de-rating delivered by price (P) largely flat and the EPS (E) rising significantly. By contrast the World ex US has had blend of price decline and a smaller rise in EPS.
Rising US bond yields have left the US equity-risk premium at levels not seen since 2002.
Markets are expecting a strong rebound in EPS growth rates next year across most regions. This is in contrast to the lower GDP forecasts for 2024.
World ex US 2023 EPS growth estimates have been significantly more volatile than the US. Both US and World ex US 2024 EPS growth estimates have been relatively stable as the year has progressed.
US technology sectors are expected to contribute over half of the 13.9% US EPS growth forecast for 2024.
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