Equity Market Commentary Q3
Market breadth takes hold as global equities advance
David Polak
Equity investment director
Mike Pollgreen
Investment product manager
Key takeaways for the quarter ended September 30, 2024
- Investors should consider remaining balanced with geographic diversity, exposure to dividend payers and growth that isn’t too concentrated.
- Global equity markets added to year-to-date gains in the third quarter, with all 28 of our equity, equity-income and balanced funds (mutual funds at F-2 shares and ETFs at market price) delivering positive returns on the quarter.
- As the U.S. officially entered an easing cycle, differences in returns across sectors and regions imply a broadening opportunity set, a potentially positive setup for long-term equity investors.
A different kind of quarter
Equities continued to rally in the third quarter, marking a fourth-straight quarter of positive results in the U.S. and globally with the S&P 500 Index, MSCI All Country World Index (ACWI) and MSCI ACWI ex USA Index all firmly in the black on the quarter and year-to-date.
The S&P 500 Index was up 5.9% on the quarter and up 22.1%year-to-date. The MSCI ACWI was up 6.6% on the quarter and up 18.7% so far for the year. The MSCI ACWI ex USA Index was up 8.1% on the quarter and up 14.2% year-to-date.
While the headline was that equities across the board were positive, diving into the numbers reveals some welcome changes for diversified equity investors.
As the Fed rate cut expectations changed rapidly in Q3, signs of equity market rotation emerged
Capital Group, CME FedWatch. As of 9/30/24. Probabilities based on trading activity in CME Fed Funds futures for the Fed meeting on 12/18/24.
Capital Group, Morningstar. As of 9/30/24. Past results are not predictive of results in future periods. The indexes are unmanaged and, therefore, have no expenses. Investors cannot invest directly in an index.
After a seemingly endless streak of dominance by domestic and growth stocks, there are early signs of a market rotation, from a narrow set of growth leaders to a broader array of companies.
In the third quarter, the MSCI ACWI ex USA Index outpaced the S&P 500 Index by more than 2 percentage points, and quarterly returns were ahead of the S&P 500 within MSCI Emerging Markets Index, MSCI Pacific ex Japan Index and MSCI Europe Index.
In another long-awaited development, the Russell 1000 Value Index far exceeded the returns of the Russell 1000 Growth Index on the quarter, 9.4% to 3.2%, respectively. This shift also extended to dividend payers, with high dividend payers outpacing low dividend payers in the U.S. The S&P 500 Index’s top dividend yield tercile returned 9.8% on the quarter compared with 4.1% for the bottom tercile.
Analyzing the constituents of the S&P 500 Index was also telling, as nearly two-thirds of the companies in the index (333 of 506 stocks) exceeded the overall index’s return during the quarter.
As we move through a paradigm shift, the market has erratically tried to predict the timing and number of interest rate cuts by the U.S. Federal Reserve based on employment and inflation data (see above chart on probability of rate cuts). The most notable development during the third quarter was a 50-basis-point rate cut by the Fed in September, the first rate cut since March 2020.
However, the more relevant backdrop for market breadth remains that the unusual near-zero interest rate environment that existed for much of the period from December 2008 to March 2022 is firmly behind us. In a world where the time value of money is positive, many types of cash flow profiles and companies could be viewed as valuable.
Back to normal — the 'new' era of higher rates
As it turns out, 2010 to 2022 was the exception to the long term
Sources: Robert Shiller, U.S. Federal Reserve. Data for 1870–1961 represent average monthly U.S. long-term government bond yields compiled by Robert Shiller. Data for 1962-2023 represent 10-year Treasury yields, as of December 31 each year within the period. Data as of 12/31/23. Past results are not predictive of results in future periods.
This quarter also brought a seesaw of sentiment and a brief selloff in the S&P 500 in July that, once the dust settled, gave way to a strong quarter. This was partially on the back of better-than-expected earnings from the technology sector that has been the driving force in markets of late.
Additionally, it appears that the earnings growth of the “Magnificent 7” stocks is moderating, while the rest of the S&P 500 Index remains positive year over year.
The earnings landscape continues to shift
Source: Bloomberg. As of 9/30/24. Earnings = net income. YoY = year over year. Magnificent 7 (highest performing stocks in the S&P 500 Index in 2023) includes Apple, Microsoft, Amazon, NVIDIA, Alphabet, Tesla and Meta. Past results are not predictive of results in future periods.
This quarter also saw the announcement of stimulus measures by China in late September, which led to a sharp rally in Chinese equities. We believe that attractive valuations exist for many growing businesses in China, and the government’s actions suggest a more concerted approach to boosting China’s economy. The debate now comes down to how much Beijing is willing to do.
There is much else we could discuss, with a U.S. presidential election just weeks away and an increasingly complicated geopolitical landscape bringing new risks in the Middle East. As bottom-up investors, however, we’ll stick true to our foundation of meeting with companies and analyzing the prospects for long-term success based on their investment fundamentals and merit.
Capital Group equity-focused mutual funds and ETFs update
American Funds mutual funds results based on F-2 share class, ETFs based on market price
During the third quarter, all 281 of our equity-focused mutual funds and ETFs1 produced positive returns for shareholders. The range spanned from 2.3% for CGGO Capital Group Growth Equity ETF on the low end to CGDV Capital Group Dividend Value ETF’s robust 10.9% gain. Year-to-date returns through the third quarter spanned from 7.1% for our global small-cap fund, SMALLCAP World Fund®, to 23.6% for CGDV.
With the market showing signs of broadening, we’re proud of how our U.S. growth-and-income funds fared against indexes and Morningstar category peers. These funds include CGDV, American Mutual Fund®, Washington Mutual Investors Fund, The Investment Company of America®, CGUS Capital Group Core Equity ETF and Fundamental Investors®. During the third quarter, five of six outpaced the S&P 500 Index by an average of 1.8% and four of six were top quartile among their respective Morningstar category peer groups.
CGDV’s results were particularly strong at 10.9% vs. the S&P 500 Index’s 5.9%, driven in part by high-quality industrial and health care companies.
Our most conservative growth-and-income fund, American Mutual Fund, outpaced the S&P 500 Index during the quarter by more than 350 basis points. Given the fund’s emphasis on pursuing downside resilience, avoiding certain large-cap tech-oriented companies was helpful.
The Investment Company of America outpaced the S&P 500 Index during the quarter and ended in the top quartile of Morningstar category peers, as aerospace & defense companies helped provide a ballast and stronger returns.
Among U.S. funds that pursue capital appreciation, our “growth” funds, results were characterized by a pullback in AI enthusiasm — helpful on the margin for our diversified funds such as The Growth Fund of America® and CGGR Capital Group Growth ETF, both of which ended the quarter in the top quartile of their growth-oriented Morningstar category peer group. Note that as the market rotated away from growth stocks, AMCAP Fund®, The Growth Fund of America and CGGR did lag the S&P 500 Index.
For our international and global funds, absolute returns were also positive. Against indexes, however, results were mixed, as 11 of 16 funds trailed. Most of the negative relative results came from growth-oriented funds, including CGGO, CGXU Capital Group International Focus Equity ETF, The New Economy Fund, EuroPacific Growth Fund® and SMALLCAP World Fund. Additionally, International Growth and Income Fund, a growth-and-income fund, trailed its index.
The quarter-end rally of Chinese equities played a key role here. All our international funds that primarily use MSCI ACWI ex USA Index as a benchmark (EuroPacific Growth Fund, CGXU and International Growth and Income Fund) hold considerably less Chinese companies, which held back relative results.
Among our funds that take a global approach, CGGO faced a headwind against its benchmark and Morningstar category peer group. The fund today holds a meaningful number of companies involved in semiconductor manufacturing, several of which slid on worries of a cyclical slowdown even as a global semiconductor leader posted strong year-over-year earnings growth.
A bright spot among our global funds came from the landscape for dividend investing, as evidenced by both CGDG Capital Group Dividend Growers ETF — an equity-income ETF that launched this year — and Capital Income Builder®, our fund with a globally diversified multi-asset approach to building income. Both funds handily outpaced the broad MSCI ACWI index (as well as the 70% MSCI ACWI/30% U.S. Aggregate Index in the case of Capital Income Builder) and landed in the top quartile of their respective Morningstar category peer groups. Capital Income Builder’s longer-term results have been very strong and top quartile within the fund’s Morningstar category peer group over the past 1-, 5- and 10-year periods.
Longer term perspective
As always, we’ll end by looking back further than the recent quarter.
With the post-pandemic down markets of 2020 and 2022 now firmly planted in the market’s history, it’s difficult to tell how much has actually changed in the world when examining the five-year annualized total returns of our equity-focused mutual funds. Ten of them, for example, have produced annualized returns of more than 10% over this timeframe, and eight of them have done so over the past decade.
We’ve also been pleased with the contour of our equity-focused mutual funds’ downside resilience over varying timeframes. This is clear over the past decade during which 88% of our available mutual funds produced less downside than their primary index as measured by down capture ratios.2
With this post-pandemic roller coaster we’ve been on, it’s a good reminder that investment objectives are important and that “time, not timing, is what matters” in the market.
1Includes all equity, balanced and equity-income funds offered in American Funds mutual funds and Capital Group ETF vehicles. Includes 28 total vehicles based on F-2 share class for American Funds and returns based on market price for Capital Group ETFs.
2As measured by down capture ratio against primary prospectus benchmark being less than 100% for all our equity-focused mutual funds with at least a 10-year track record.
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1 year
Fund Total Return Percentile Peers Morningstar Category AMCAP Fund 36.0% 71st 1121 Large Growth American Balanced Fund 26.1% 15th 708 Moderate Allocation American Funds Developing World Growth and Income Fund 20.9% 73rd 787 Diversified Emerging Markets American Funds Global Balanced Fund 23.3% 26th 353 Global Allocation American Funds Global Insight Fund 26.9% 68th 344 Global Large-Stock Blend American Funds International Vantage Fund 23.4% 79th 401 Foreign Large Growth American Mutual Fund 28.8% 34th 1162 Large Value CGUS Capital Group Core Equity ETF 38.1% 9th 1397 Large Blend CGDV Capital Group Dividend Value ETF 40.0% 1st 1162 Large Value CGGO Capital Group Global Growth Equity ETF 32.6% 46th 337 Global Large-Stock Growth CGGR Capital Group Growth ETF 42.5% 33rd 1121 Large Growth CGXU Capital Group International Focus Equity ETF 24.9% 65th 401 Foreign Large Growth Capital Income Builder 24.3% 22nd 353 Global Allocation Capital World Growth and Income Fund 30.1% 38th 344 Global Large-Stock Blend EuroPacific Growth Fund 24.6% 68th 401 Foreign Large Growth Fundamental Investors 37.5% 13th 1397 Large Blend International Growth and Income Fund 22.0% 77th 704 Foreign Large Blend New Perspective Fund 31.6% 51st 337 Global Large-Stock Growth New World Fund 24.5% 40th 787 Diversified Emerging Markets SMALLCAP World Fund 21.3% 47th 144 Global Small/Mid Stock The Growth Fund of America 40.8% 45th 1121 Large Growth The Income Fund of America 23.2% 71st 297 Moderately Aggressive Allocation The Investment Company of America 39.2% 6th 1397 Large Blend The New Economy Fund 38.1% 21st 337 Global Large-Stock Growth Washington Mutual Investors Fund 32.6% 62nd 1397 Large Blend -
5 years
Fund Total Return Percentile Peers Morningstar Category AMCAP Fund 13.3% 82nd 998 Large Growth American Balanced Fund 9.5% 19th 630 Moderate Allocation American Funds Developing World Growth and Income Fund 4.0% 76th 637 Diversified Emerging Markets American Funds Global Balanced Fund 7.2% 33rd 326 Global Allocation American Funds Global Insight Fund 10.4% 58th 296 Global Large-Stock Blend American Funds International Vantage Fund 8.2% 44th 336 Foreign Large Growth American Mutual Fund 11.4% 45th 1026 Large Value CGUS Capital Group Core Equity ETF N/A N/A N/A Large Blend CGDV Capital Group Dividend Value ETF N/A N/A N/A Large Value CGGO Capital Group Global Growth Equity ETF N/A N/A N/A Global Large-Stock Growth CGGR Capital Group Growth ETF N/A N/A N/A Large Growth CGXU Capital Group International Focus Equity ETF N/A N/A N/A Foreign Large Growth Capital Income Builder 7.8% 21st 326 Global Allocation Capital World Growth and Income Fund 11.2% 46th 296 Global Large-Stock Blend EuroPacific Growth Fund 7.4% 58th 336 Foreign Large Growth Fundamental Investors 14.9% 50th 1182 Large Blend International Growth and Income Fund 7.5% 63rd 626 Foreign Large Blend New Perspective Fund 13.7% 21st 273 Global Large-Stock Growth New World Fund 8.3% 18th 637 Diversified Emerging Markets SMALLCAP World Fund 8.7% 46th 117 Global Small/Mid Stock The Growth Fund of America 16.7% 44th 998 Large Growth The Income Fund of America 8.4% 75th 265 Moderately Aggressive Allocation The Investment Company of America 16.0% 17th 1182 Large Blend The New Economy Fund 12.9% 34th 273 Global Large-Stock Growth Washington Mutual Investors Fund 13.9% 65th 1182 Large Blend -
10 years
Fund Total Return Percentile Peers Morningstar Category AMCAP Fund 11.3% 87th 788 Large Growth American Balanced Fund 8.7% 12th 483 Moderate Allocation American Funds Developing World Growth and Income Fund 2.4% 83rd 426 Diversified Emerging Markets American Funds Global Balanced Fund 5.5% 29th 243 Global Allocation American Funds Global Insight Fund 9.3% 40th 196 Global Large-Stock Blend American Funds International Vantage Fund 6.9% 37th 224 Foreign Large Growth American Mutual Fund 10.4% 21st 802 Large Value CGUS Capital Group Core Equity ETF N/A N/A N/A Large Blend CGDV Capital Group Dividend Value ETF N/A N/A N/A Large Value CGGO Capital Group Global Growth Equity ETF N/A N/A N/A Global Large-Stock Growth CGGR Capital Group Growth ETF N/A N/A N/A Large Growth CGXU Capital Group International Focus Equity ETF N/A N/A N/A Foreign Large Growth Capital Income Builder 6.2% 14th 243 Global Allocation Capital World Growth and Income Fund 8.7% 57th 196 Global Large-Stock Blend EuroPacific Growth Fund 6.2% 57th 224 Foreign Large Growth Fundamental Investors 12.4% 44th 893 Large Blend International Growth and Income Fund 5.0% 71st 421 Foreign Large Blend New Perspective Fund 11.6% 16th 192 Global Large-Stock Growth New World Fund 6.8% 1st 426 Diversified Emerging Markets SMALLCAP World Fund 8.8% 16th 76 Global Small/Mid Stock The Growth Fund of America 13.7% 54th 788 Large Growth The Income Fund of America 7.3% 64th 221 Moderately Aggressive Allocation The Investment Company of America 12.1% 51st 893 Large Blend The New Economy Fund 11.5% 18th 192 Global Large-Stock Growth Washington Mutual Investors Fund 11.9% 54th 893 Large Blend
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*Source: Capital Group, based on Morningstar data as of September 30, 2024. The Morningstar rankings do not reflect the effects of sales charges, account fees or taxes. Past results are no guarantee of results in future periods. While American Funds class F-2 shares do not include fees for advisor compensation and service provider payments, the share classes represented in the Morningstar category have varying fee structures and can include these and other fees and charges, resulting in higher expenses.
Fund results and analysis
Index comparisons:
The 20 equity-focused American Funds and their primary benchmarks in the results are as follows, unless otherwise indicated: AMCAP Fund®, American Mutual Fund®, Fundamental Investors®, The Growth Fund of America®, The Investment Company of America® and Washington Mutual Investors Fund (S&P 500 Index); American Balanced Fund® (60% S&P 500 Index and 40% Bloomberg U.S. Aggregate Index); American Funds® Global Balanced Fund (60% MSCI All Country World Index and 40% Bloomberg Global Aggregate Index); Capital Income Builder® (70%/30% MSCI All Country World Index/Bloomberg U.S. Aggregate Index); The Income Fund of America® (65%/35% S&P 500 Index/Bloomberg U.S. Aggregate Index); Capital World Growth and Income Fund®, The New Economy Fund®, New Perspective Fund® and New World Fund® (MSCI All Country World Index); American Funds® Developing World Growth and Income Fund (MSCI Emerging Markets Index); EuroPacific Growth Fund® and International Growth and Income Fund (MSCI All Country World ex USA Index); SMALLCAP World Fund® (MSCI All Country World Small Cap Index); American Funds® International Vantage Fund (MSCI EAFE [Europe, Australasia, Far East] Index); American Funds® Global Insight Fund (MSCI World Index).
The eight Capital Group equity-focused ETFs and their primary benchmarks in the results are as follows: CGBL Capital Group Core Balanced ETF (60%/40% S&P 500 Index/Bloomberg U.S. Aggregate Index); CGDG Capital Group Dividend Growers ETF, CGGO Capital Group Growth Equity ETF (MSCI All Country World Index); CGIE Capital Group International Equity ETF (MSCI EAFE [Europe, Australasia, Far East] Index); CGUS Capital Group Core Equity ETF, CGGR Capital Group Growth ETF, CGDV Capital Group Dividend Value ETF (S&P 500 Index); CGXU Capital Group International Focus Equity ETF (MSCI All Country World ex USA Index).
- Class F-2 shares were first offered on 8/1/2008.
- When applicable, returns for less than one year are not annualized, but calculated as cumulative total returns.
- YTD (year-to-date return): For the period from January 1 of the current year to the date shown or from inception date if first offered after January 1 of the current year.
60%/40% MSCI All Country World Index/Bloomberg Global Aggregate Index blends the MSCI All Country World Index with the Bloomberg Global Aggregate Index by weighting their cumulative total returns at 60% and 40%, respectively. The blend is rebalanced monthly. MSCI All Country World Index is a free-float-adjusted market-capitalization-weighted index that is designed to measure equity market results in the global developed and emerging markets, consisting of more than 40 developed- and emerging-market country indexes. Results reflect dividends gross of withholding taxes through December 31, 2000, and dividends net of withholding taxes thereafter. Bloomberg Global Aggregate Index represents the global investment-grade fixed income markets. The indexes are unmanaged, and results include reinvested distributions but do not reflect the effect of sales charges, commissions, account fees, expenses or U.S. federal income taxes.
60%/40% S&P 500 Index/Bloomberg U.S. Aggregate Index blends the S&P 500 with the Bloomberg U.S. Aggregate Index by weighting their cumulative total returns at 60% and 40%, respectively. The blend is rebalanced monthly. S&P 500 Index is a market- capitalization-weighted index based on the results of approximately 500 widely held common stocks. Bloomberg U.S. Aggregate Index represents the U.S. investment-grade fixed-rate bond market. The indexes are unmanaged, and results include reinvested distributions but do not reflect the effect of sales charges, commissions, account fees, expenses or U.S. federal income taxes.
65%/35% S&P 500 Index/Bloomberg U.S. Aggregate Index blends the S&P 500 with the Bloomberg U.S. Aggregate Index by weighting their cumulative total returns at 65% and 35%, respectively. The blend is rebalanced monthly. S&P 500 Index is a market-capitalization-weighted index based on the results of approximately 500 widely held common stocks. Bloomberg U.S. Aggregate Index represents the U.S. investment-grade fixed-rate bond market. The indexes are unmanaged, and results include reinvested distributions but do not reflect the effect of sales charges, commissions, account fees, expenses or U.S. federal income taxes.
70%/30% MSCI All Country World Index/Bloomberg U.S. Aggregate Index blends the MSCI All Country World Index with the Bloomberg U.S. Aggregate Index by weighting their total returns at 70% and 30%, respectively. The blend is rebalanced monthly. MSCI All Country World Index is a free-float-adjusted market-capitalization-weighted index that is designed to measure equity market results in the global developed and emerging markets, consisting of more than 40 developed- and emerging-market country indexes. Results reflect dividends gross of withholding taxes through December 31, 2000, and dividends net of withholding taxes thereafter. Bloomberg U.S. Aggregate Index represents the U.S. investment-grade fixed-rate bond market. The indexes are unmanaged, and results include reinvested distributions but do not reflect the effect of sales charges, commissions, account fees, expenses or U.S. federal income taxes.
MSCI All Country World ex USA Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market results in the global developed and emerging markets, excluding the United States. The index consists of more than 40 developed and emerging market country indexes. Results reflect dividends gross of withholding taxes through December 31, 2000, and dividends net of withholding taxes thereafter. This index is unmanaged, and its results include reinvested dividends and/or distributions but do not reflect the effect of sales charges, commissions, account fees, expenses or U.S. federal income taxes.
MSCI All Country World Index (ACWI) is a free float-adjusted market capitalization weighted index that is designed to measure equity market results in the global developed and emerging markets, consisting of more than 40 developed and emerging market country indexes.
MSCI EAFE® (Europe, Australasia, Far East) Index is a free float-adjusted market capitalization weighted index that is designed to measure developed equity market results, excluding the United States and Canada. Results reflect dividends net of withholding taxes. This index is unmanaged, and its results include reinvested dividends and/or distributions but do not reflect the effect of sales charges, commissions, account fees, expenses or U.S. federal income taxes.
MSCI Emerging Markets Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market results in the global emerging markets, consisting of more than 20 emerging market country indexes. Results reflect dividends gross of withholding taxes through December 31, 2000, and dividends net of withholding taxes thereafter. This index is unmanaged, and its results include reinvested dividends and/or distributions but do not reflect the effect of sales charges, commissions, account fees, expenses or U.S. federal income taxes.
MSCI Europe Index is a free float-adjusted market capitalization-weighted index that is designed to measure results of more than 10 developed equity markets in Europe. Results reflect dividends net of withholding taxes. This index is unmanaged, and its results include reinvested dividends and/or distributions but do not reflect the effect of sales charges, commissions, account fees, expenses or U.S. federal income taxes.
The MSCI Pacific ex Japan Index captures large and mid cap representation across Developed Markets (DM) countries in the Pacific region (excluding Japan). The index covers approximately 85% of the free float-adjusted market capitalization in each country.
MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market results of developed markets. The index consists of more than 20 developed market country indexes, including the United States. Results reflect dividends net of withholding taxes. This index is unmanaged, and its results include reinvested dividends and/or distributions but do not reflect the effect of sales charges, commissions, account fees, expenses or U.S. federal income taxes.
The Russell 1000® Growth Index measures the performance of the large-cap growth segment of the US equity universe. It includes those Russell 1000 companies with relatively higher price-to-book ratios, higher I/B/E/S forecast medium term (2 year) growth and higher sales per share historical growth (5 years). The Russell 1000® Growth Index is constructed to provide a comprehensive and unbiased barometer for the large-cap growth segment. The index is completely reconstituted annually to ensure new and growing equities are included and that the represented companies continue to reflect growth characteristics. S&P 500 Index is a market capitalization-weighted index based on the average weighted results of approximately 500 widely held common stocks.
The Russell 1000® Value Index measures the performance of the large-cap value segment of the US equity universe. It includes those Russell 1000 companies with relatively lower price-to-book ratios, lower I/B/E/S forecast medium term (2 year) growth and lower sales per share historical growth (5 years). The Russell 1000® Value Index is constructed to provide a comprehensive and unbiased barometer for the large-cap value segment. The index is completely reconstituted annually to ensure new and growing equities are included and that the represented companies continue to reflect value characteristics.
The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 Index is a subset of the Russell 3000 Index which is designed to represent approximately 98% of the investable U.S. equity market. It includes approximately 2,000 of the smallest securities based on a combination of their market cap and current index membership. The Russell 2000 is constructed to provide a comprehensive and unbiased small-cap barometer and is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set.
S&P 500 Index is a market capitalization-weighted index based on the results of approximately 500 widely held common stocks. This index is unmanaged, and its results include reinvested dividends and/or distributions but do not reflect the effect of sales charges, commissions, account fees, expenses or U.S. federal income taxes.
The S&P High Yield Dividend Aristocrats Index is designed to measure the performance of companies within the S&P Composite 1500 Index that have followed a managed-dividends policy of consistently increasing dividends every year for at least 20 years.
SMALLCAP World Fund Historical Benchmarks Index returns reflect the results of the S&P Global <$3 Billion Index through 09/30/2009 and the MSCI All Country World Small Cap Index, the fund's current primary benchmark, thereafter. Cumulative returns for the S&P Global <$3 Billion Index include results from the comparative indexes as follows: S&P Global<$3 Billion (May 2006 to September 2009), S&P Global <$2 Billion (May 2004 to April 2006), S&P Developed <$1.5 Billion (January 2000 to April 2004), and S&P Developed <$1.2 Billion (1990 to 1999). The S&P Global indexes include both developed and developing countries. The S&P Developed indexes (used prior to May 2004) only include stocks in developed countries. MSCI All Country World Small Cap Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market results of smaller capitalization companies in both developed and emerging markets. MSCI index results reflect dividends net of withholding taxes. These indexes are unmanaged, and their results include reinvested dividends and/or distributions but do not reflect the effect of sales charges, commissions, account fees, expenses or U.S. federal income taxes.
The MSCI World Small Cap Index captures small cap representation across 23 Developed Markets (DM) countries. With 4,052 constituents, the index covers approximately 14% of the free float-adjusted market capitalization in each country.
The 10-year Treasury is a type of Treasury securities that are debt obligations (otherwise known as bills, notes and bonds) issued by the U.S. Department of the Treasury with the full faith and credit of the federal government. The 10-year Treasury note pays interest every six months and can be held until maturity (10 years) or sold on the secondary market before it matures. The price and yield of the 10-year Treasury reflects market opinions about the health and expectations of the U.S. economy over the next decade.
CME Fed Fund futures contracts are based on the Effective Federal Funds rate as reported by the Federal Reserve Bank of New York. Contracts are listed monthly, extending 36 months or three years out on yield curve. Fed Fund futures are traded as a price rather than as a rate. The price is simply the implied rate subtracted from 100. For example, if the average monthly Fed Funds rate for September is 1.20% the futures price would be 100 - 1.20 = 98.800.
Down capture ratio is a statistical measure of an investment manager's overall performance in down-markets.
Earnings per share (EPS) is the measure of a company’s profitability, and it’s commonly used in fundamental analysis. It is calculated by dividing a company’s net earnings (“profits”) by the total number of outstanding stock shares.
Magnificent 7 refers to seven companies (Microsoft, Apple, Alphabet, Amazon, NVIDIA, Meta and Tesla) whose stocks came to dominate the U.S. stock market indexes in 2023. The phenomenon is reminiscent of previous periods of market concentration, including "FAANG" stocks in the mid-2010s and "Nifty 50" stocks in the 1960s and '70s.
Market breadth is a measure of how many issues are participating in market movements. As market breadth increases, a higher number of securities experience an increase in value. Conversely, as market breadth decreases, fewer securities participate in market rallies.
Market rotation refers to the changing of investor sentiment from one sector to another over time.