RESEARCH: MACRO & ECONOMICS

EQUITY FACTORS & THE MIGHTY US DOLLAR

• The US dollar had a slightly negative relationship with the stock market since 1996
• Some equity factors are more sensitive to changes in the US dollar than others
• On average the sensitivity is zero, but as often averages are misleading

CORPORATE DEBT IN THE CHINESE STOCK MARKET

• China exhibits the world’s highest corporate debt as % of GDP
• However, Chinese stocks are not significantly more levered than U.S. stocks
• Asset and debt growth has stalled in 2018, likely indicating an economic slowdown

EQUITY FACTORS & INFLATION

• Factor performance is impacted by inflation and deflation
• An inflationary environment is more attractive for most factors
• The change in inflation has been most meaningful for the Size factor

EQUITY FACTORS & GDP GROWTH

• Economic cycles have a clear impact on factor performance
• Some factors show pro-cyclical while others highlight anti-cyclical characteristics
• Given that real GDP is not published in real-time, it is unlikely effective for factor selection

FACTORS & INTEREST RATES

• There are no consistent relationships between Value, Size, Momentum and interest rates
• Applies to high and low and increasing and decreasing rate environments
• Investors shouldn’t be too concerned about factor exposure and rising rates, more about very low rates