ab2 February 2024Global Research and Evidence LabUS Style GuideA Mixed Start to 2024 Market Performance2024 started with mixed results as large caps outperformed small caps (Russell 1000 up by 1.4%, while the Russell 2000 down -3.9%). The S&P 500 was up 1.7%, hitting an all time high. Inflation fears continued to subside during the month, as January reported PCE numbers remained unchanged from December (2.6%) and the Fed held interest rates steady at the end of the month. Factor OverviewFactor performance was also mixed. Growth, Momentum, Quality and Size factors all outperformed while Value and Risk factors were a mixed bag. Delta Quality was the best performing factor (+12%), followed by Fundamental Growth (+8%), while Book Value Yield, Dividend Yield, and FCF Yield modestly underperformed (-1.3%, -1.4%% and -1.3%, respectively) (Figure 1).Investing Environment OverviewThe USD Index and Gold continued to be the key macro drivers during the month, continuing the trend from 2023. However, the overall importance of macro factors fell in January to 30% from 40% in December (Figure 2). Pairwise correlation (Figure 4)Average pairwise corelation and cross sectional volatility (Figure 3Cros-sectional volatility) both remained largely unchanged from December lows (both ticked down 1%). When considered together, these two indicators signal headwinds for active investors.Figure 1: Style Factor Last Month Performance - Russell 3000Source: FactSet, UBS Quantitative DatabaseThis report has been prepared by UBS Securities LLC. NA ANALYST CERTIFICATION AND REQUIRED DISCLOSURES, including information on the Quantitative Research Review published by UBS, begin on page 12. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.EquitiesAmericasQuantitativeNicolo MenezAnalyst nicolo.menez@ubs.com +1-212-713 3183Paul WinterAnalyst paul-j.winter@ubs.com +61-2-9324 2080Jaiwish NolanAnalyst jaiwish.nolan@ubs.com +1-212-713 1489Tongda CheAnalyst tongda.che@ubs.com +1-212-713 3919Claire JonesAnalyst claire-c.jones@ubs.com +44-20-7568 1873Cathy Fang, PhDAnalystS1460518100001 cathy.fang@ubs.com +86-21-3866 8891Aaron Guo, CFAAnalyst aaron.guo@ubs.com +852-2971 7705Will StephensAnalyst will.stephens@ubs.com +852-3712 3892Anita Mansbridge, FIAAAnalyst anita.mansbridge@ubs.com +44-20-7568 1872 US Style Guide 2 February 2024ab 2US Style GuideUBS ResearchMarket OverviewWhat's driving the markets?Macro factors help provide a top-down view on market drivers. We look at a number of globally relevant macroeconomic factors and observe both their levels and their change in importance through time. We obtain these (Figure 2US macro drivers through time) by calculating...
