Welcome to this week’s market review. We’re analysing Apple Inc., the first stock to reach a $3 Trillion market cap. On top of that, we’ll give an overview of the market’s performance year to date.

Apple has recently crossed the remarkable milestone of $3 trillion, which is equivalent to a staggering 3 million million dollars. Such vast numbers can be challenging for our minds to comprehend. In the realm of finance, a trillion represents one of the largest orders of magnitude that one may encounter.

To put Apple's achievement into perspective, consider this: the combined market capitalization of the smallest 4,100 publicly traded stocks in the United States, which accounts for almost 75% of all stocks, is roughly equal to that of Apple alone.

Furthermore, Apple Inc. now holds a substantial 5.5% share of the entire U.S. stock market. Considering other tech giants such as Microsoft, Google, Amazon, Nvidia, Tesla, Meta, and Visa, these eight companies collectively represent over 21% of the market.


While Apple has been incredibly strong in 2023, they aren’t the only big tech company to perform well this year. Of the eight tech companies listed above, the average year-to-date return is almost 80%. The combined market cap of these stocks has grown by over $4T.

Big tech has been driving the Nasdaq-100 (QQQ) and S&P 500’s (SPY) outperformance in 2023. The Nasdaq-100 has increased by 36.5%, for its best ever year to date return. The S&P 500 has increased an impressive 14.1% over the same period. The Dow Jones Industrial Average (DIA) and the Russell 2000 (IWC) have had a comparatively poor year to date, with minor gains of 2.8% and 4.2% respectively.

Bitcoin continues its 2023 recovery with an 84% return year to date. Microstrategy recently added to their Bitcoin holdings, which is now over $4.5B. Additionally, in the past number of weeks, Fidelity and Blackrock filed applications to launch Bitcoin ETFs. The other crypto assets have been lagging Bitcoin. Ethereum, Polkadot, and Ripple have increased 57%, 14%, and 41% year-to-date, while Binance Coin is down 6% in 2023.

, allows you to invest in tech in a data driven way. 

A market update for July 3, 2023. Analysing Apple, the first stock to surpass the $3T market cap. Plus an overview of the market year to date. 

Apple Hits $3 Trillion

Welcome to this week's exciting market review, where we dive deep into the phenomenal performance of Ndivia! Some of the stats are simply staggering. 

Nvidia (NVDA) is a fabless chip designer. They design and manufacture advanced graphics processing units (GPUs) and artificial intelligence (AI) computing solutions. They recently announced their 2023 Q1 earnings and it was a blockbuster. Nvidia's one day market cap change was the third biggest on record for U.S. stocks, rising $184 B in a single trading session. 

Here are the top 5 biggest one-day market cap increases:

Microsoft - Apr 26, 2023 - $148 B increase

Nvidia is not the only chip designer, but it has been the dominant player in the space over the past number of years. They are well placed to capitalise on the AI revolution which is firmly underway. Their stock has gone vertical recently, rising well-over 100% in the past 12 months. The stock has added over $0.5T to it's market cap.

NVDA's impressive results have provided a significant boost to the chip industry. However, the other stocks have failed to keep pace with NVDA's performance. Broadcom (AVGO) and Micron (MU) have been strong, rising 51% and 13% respectively. On the other hand, Qualcomm (QCOM) and Intel (INTL) have struggled, with declines of 18% and 25% respectively. 

The factor driving the performance of each stock can partly be explained by the following chart. We've plotted the previous 6 quarters of revenue for each semiconductor stock listed above. The revenue of Intel and Micron has fallen almost 50% over the past 18 months while Nvidia and Broadcom have been steady. 

Next, we'll evaluate the net income or profit of each stock. A similar pattern has played out. Intel's quarterly net income has fallen from $4.6B to -2.75B, a $7.35B change in just 6 quarters of data. Once again, Nvidia and Broadcom have been resilient over the past 18 months. Their profits have been steadily rising since Q1 2022.

Perhaps the most important question of all is how much investors are willing to pay for these companies. This is where a significant divergence appears in the data. Nvidia has a price-to-sales ratio of 36, which puts it among the top 2.5% of most highly valued companies based on this metric.

Investors are anticipating a lot of growth from this stock and the industry at large. Considering the valuations, is one of the other semiconductor providers a better investment?

Of course, we champion a systematic approach. This technology-based strategy, allows invest in tech in a data driven way. 

A market update for May 31, 2023. We're looking at Nvidia's stellar performance. We'll compare it's financials against its semiconductor peers.

Semiconductors: The AI Opportunity

In this week's market review, our focus lies on examining the annual returns of the biggest market indices. We'll gauge the indices 2023 performance in relation to historical data. The results make for interesting reading.

The Nasdaq-100 is an index that represents the performance of the top 100 non-financial companies that are listed on the Nasdaq stock exchange. It includes technology, internet, and biotechnology companies. The index is  also weighted based on the market capitalisation of each company. 

The worst year for the Nasdaq-100 was also 2008, it returned -43.2%. The index bounced back in 2009, returning a stunning 54.7%. A similar trend might be playing out between 2022 and 2023. The Nasdaq-100 returned -32.6% in 2022, while this year has been the best year-to-date on record, with a 22.6% return so far.

The S&P 500 is an index consisting of the 500 largest publicly traded companies in the U.S., weighted by their market capitalisation. This means that larger companies have a greater impact on the index's performance. As of May 2023, Apple and Microsoft alone account for over 14% of the index. The S&P 500 is often used as a benchmark to evaluate the performance of other stock portfolios.

Looking at the historical returns since 2006, the best year for the S&P 500 was 2013, with a remarkable return of 32.3%. Conversely, the worst year was 2008, experiencing a significant decline of -37.7%. It's worth noting that in the current year, the index has delivered a healthy return of 8%.

We've seen a decade of underperformance of smaller-cap stocks, and the trend has continued in 2023. The micro-cap stocks are down almost 5% year-to-date, underperforming the broader market by a huge extent. 

David and Goliath of Stocks: Small Caps vs Large Caps

Finally, we're analysing the relative performance of the Nasdaq-100 versus U.S. micro-cap stocks. We've plotted the yearly return of the Nasdaq-100 (QQQ) denominated in micro-cap stocks (IWC). As we can see in the chart below, the Nasdaq-100 has outperformed micro-cap stocks by over 30% year-to-date. This level of outperformance was surpassed only in 2020.

As we can see in the following chart, the Nasdaq-100 has outperformed the U.S. micro-cap stocks by a large margin since 2006. Over this timeframe, the mean outperformance of the Nasdaq-100 over micro-cap stocks is almost 9%.

This success has triggered a substantial expansion in the Nasdaq's multiples, with investors eagerly paying a premium for it. With a weighted Price-to-Earnings (P/E) ratio of 29.6 for the Nasdaq-100, compared to the S&P 500's 21.5, and a mere 9.1 for the micro-cap ETF (IWC), the stage is set for potential mean-reversion in these P/E ratios. It's worth noting that the performance of these indices follows cyclical patterns over extended periods. 

What do you expect to see over the next 10 years?

If you'd like to research and create your own stock strategy using various market cap groups or sectors, then check out our 

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A market update for May 22, 2023. This week we're looking at yearly performance of the top stock market indices. 

Market Review - May 22 2023

In this week's market review, we're taking a closer look at how the S&P 500 has been crushing it, even in the face of increasing rates. We're also exploring some potential routes back to new all-time-highs. Finally, we'll delve into the U.S. Regional Bank stocks. Let's just say, it's not a pretty sight. 

Don't miss out on all the action! You can read last week's review 

The U.S Federal Reserve has executed the fastest rate increase since the 1980s. The Federal Funds rate just surpassed 5% for the time in 16 years. Nevertheless, despite these circumstances, the market has shown remarkable resilience, with a mere 15% dip from its peak in January 2022. Below, we've charted the S&P 500 drawdown and the interest rate since 1980. The dashed lines indicate periods of high interest rate increases. As we can see from the chart, the current market performance is an anomaly. In the previous instances where rates have increased to similar levels, the market has declined precipitously.

We've analysed every significant market drawdown since 1980. We can observe from the chart below that the present downturn is less severe than the others. Assuming that the market has already bottomed, we can anticipate a robust return in the upcoming months. The green line indicates the average return following a market low. 

It is important to note that on a macroeconomic level, we are not completely out of the woods yet. Interest rates are very high. Many small-cap stocks are struggling and the market is being kept afloat by large tech. 

Apple and Microsoft now account for over 14% of the S&P 500.

First Republic Bank (FRC) was the latest and the largest bank stock to fail in 2023. Regional Bank stocks have been obliterated so far this year. The average return of the industry is -27% and only a handful of stocks are positive year-to-date. The chart below represents the market cap and year-to-date return of every regional banking stock. If the Fed continues to increase rates, then it's likely that these stocks will continue to plummet. 

A market update for May 8, 2023. This week we're looking at interest rates, banks stocks, and we're charting a course to new all-time-highs.

Market Review - May 8 2023

The first four months of 2023 have come and gone, and it's time to take a peek at how the different asset classes are performing year-to-date. We've got you covered with our analysis of the stock market indices, sectors, style factors, and market cap quintiles. We're also throwing in a bonus look at the impressive year-to-date performance of the major cryptocurrencies. 

So far in 2023, the market cap weighted Nasdaq-100 (QQQ) and S&P 500 (SPY) have been performing exceptionally well, with the mega cap stocks leading the way. The Nasdaq-100 has seen an increase of over 21%, while the S&P 500 has risen by over 9%. Comparatively, the Dow Jones Industrial Average has seen a growth of 2.5%, while the small cap Russel-2000 (IWM) has remained relatively unchanged.

In order to provide a more detailed analysis of stock performance based on market capitalization, we have sorted each stock in our universe into one of five groups, or quintiles, based on their market cap. The results are striking. The returns of each quintile show a linear increase corresponding to the size of the underlying market capitalizations. The largest 20% of stocks outperformed the smallest 20% of stocks by a 10.4% differential. 

Turning now to the sector data. The Non-Energy Minerals sector has been the top performer this year. The stocks in this sector have an average year-to-date return of 11.3%. The Services and Technology Services sectors follow closely behind. The worst performing sector in 2023 has been the Energy Minerals sector, returning -7.3%.

After a torrid 2022, the cryptocurrency market has sprung into life this year. Bitcoin has surged by almost 75% while Ethereum has risen over 55%. The other major cryptocurrencies are all in the green also. 2023 has generally been favorable for risk-on assets, as evidenced by the crypto returns graph shown below. Bitcoin investors can take comfort in its price performance during the banking crisis that has unfolded since the beginning of the year.

A market update for May 2, 2023. The first four months of 2023 have come and gone, and it's time to take a peek at how the different asset classes are performing year-to-date.

Market Review - May 2 2023

We're taking a look at interest rates, inflation, and your savings. We'll show the importance of holding a diversified portfolio of investable assets through simple and digestible charts.

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You might think that holding cash is a safe investment, but it means accepting the fact that inflation continually diminishes your purchasing power. This leads to a consistent decline in the value of your money. In order to illustrate this phenomenon, we have created a graph that demonstrates the purchasing power of $10k since 2010. Over this period, the cumulative effect of inflation has resulted in a reduction in value of nearly 30%.

We have created a chart that compares the inflation rate with the risk-free interest rate. The differential between inflation and the interest rate, shown in light blue, is nearing zero, indicating that the Federal Reserve is making progress in managing inflation. This is an encouraging sign for the economy. It is worth noting that despite this progress, inflation remains significantly high, sitting at 5%, or twice its long-run average of approximately 2.5%.

By investing your money in assets that have historically outperformed inflation, such as stocks and commodities, you can potentially earn returns that exceed the inflation rate. This means that your money's purchasing power can increase over time, allowing you to achieve your financial goals.

Investing in a diversified portfolio of assets can also help to reduce the risk of losing money due to inflation, as different types of investments may perform differently under various economic conditions. Therefore, investing to counter inflation can be an effective strategy to protect and grow your wealth over the long term.

Cash maybe stable over short periods, but it tends to lose value consistently in the long term. On the other hand, stocks, bonds, commodities, and real estate exhibit volatility over shorter periods, but they outperform cash over longer periods. To illustrate this point, we have plotted the 20-year performance of several assets, including the S&P 500, Nasdaq-100, Gold, Silver, Oil, Real Estate, Government Bonds, and Inflation. To build long-term wealth, take a long-term perspective. We can see that every asset class we've chosen has outperformed inflation (in light green).

Now let's examine the return and volatility characteristics of each asset class. The primary objective of any portfolio is to maximize returns while minimizing risk or volatility. Each asset class possesses a unique risk-return profile, and a diversified combination of them ensures consistent and sustainable wealth growth.

Investing in an ETF-based strategy is a straightforward approach to building a diversified portfolio. Our 'Go with the Mo' strategy selects two top-performing ETFs from different asset classes. Based on our backtests, this strategy has performed exceptionally well over the past decade, surpassing the benchmark on both raw return and risk-adjusted basis.

A market update for April 26, 2023. We're taking a look at interest rates, inflation, and your savings. We'll show the importance of holding a diversified portfolio.

Market Review - April 26, 2023

This week we've got an exciting analysis and outlook on interest rates. We'll also breakdown the year-to-date performance of U.S. stocks by sector. The results might surprise you. Finally, we'll provide an overview of the crypto market. 

💡 Did you know that we released a new momentum-based ETF strategy? It has outperformed the market, according to our backtests, over the past 1-year, 3-years, 5-years, and all-time. 

Over the past few weeks, the situation regarding regional banks in the U.S. has become more stable. Interest rates continue to climb and they're fast approaching 5%, the highest point since March 2007. 

Inflation has continued to slow for the ninth month in a row and dropped below 5%. 

 for the overall economy as it may prompt the Federal Reserve to adopt a more accommodating approach. This could lead to a decrease in interest rates before the year-end. However, despite this possibility, the market still expects three more rate hikes in the coming months. When the Fed eventually shifts its stance, history indicates that rate reductions occur swiftly. Our analysis of this pattern is shown in the chart below. We've plotted all the previous Fed pivots since 1960. In green, we've plotted a potential path for interest rates over the coming months.

Let's shift our focus to the year-to-date progress of the various sectors in the United States. Our analysis involves examining the performance of each stock within a sector to ascertain the proportion that has outperformed the S&P 500. Based on the chart, it's apparent that most sectors have underperformed the broader market. Interestingly, the Non-Energy Minerals sector is the only one where the majority of stocks have outpaced the market.

The results are maybe a little less surprising when we consider that almost 50% of the return of the S&P 500 is due to the following stocks - Apple, Amazon, Nvidia, Tesla, Google, Meta, Microsoft. Let's look at a comparison of the S&P 500 with and without the mega-cap tech stocks.

Over the last few days, Bitcoin has been trading sideways after surpassing the $30k level. Meanwhile, Ethereum has experienced a significant boost, reaching the $2k milestone for the first time in almost a year, resulting in a 13.5% gain for the week. Binance Coin, Polkadot, and Ripple have also had a positive week, with their prices being influenced by their correlation to the larger assets such as Ethereum and Bitcoin.

A market update for April 18, 2023. This week we've got an exciting analysis and outlook on interest rates. 

Market Review - April 18, 2023

This week we're looking at the year-to-date performance of the biggest market indices and style factors. We'll also give an update on the performance of the STRATxAI ETF strategies. Finally, we'll explore Bitcoins recent dominance over the crypto sector.

In 2023, the technology sector has been the primary contributor to the overall gains. Year-to-date, the Nasdaq-100 (QQQ) has experienced a substantial increase of nearly 20%, surpassing the performance of other indices. The S&P 500 (SPY) maintains a positive trend with a growth of 7.4%, while the Dow Jones Industrial Average (DIA) and Russell-2000 have shown little progress, remaining flat for the year thus far.

60% (4.2%) of the return of the S&P 500 this year is attributable to just 7 stocks. Apple, Microsoft, Amazon, Nvidia, Tesla, Google, and Meta account for only 24% of the index.

If you'd like to invest in Big-Tech in a systematic way, then check out 

💡Tip: To edit this strategy, use the Clone Strategy button from the drop-down menu in the top right 💡

Turning now to the primary style factors. The quality factor is leading the way in 2023, with a 5.6% gain. The remaining factors, value, dividend yield, low vol, and momentum remain flat for the year. 

We provide a catalog of diversified ETF strategies. Analysing the performance of each of these strategies over the past year, we can compare their performance versus that of the S&P 500, which has returned -6.6% over the past year. Our momentum strategy, 'Go with the Mo' comes out on top with a 4.3% gain over the past 12 months. This is followed by the 'Market Rotation' and the 'All-Weather' strategies, which have returned -3%. The 'Stock-Bond Switch' strategy is down -4.5% while the ESG focused 'Green Planet' strategy has returned -15%.

 for an in-depth analysis of their performance.

Bitcoin dominance typically increases during bear markets in the cryptocurrency market. This is because investors tend to flock to the safety of Bitcoin, relative to other cryptocurrencies, during times of volatility. In addition, Bitcoin has a longer track record and greater liquidity than many other cryptocurrencies, making it a more stable investment choice for many investors during bear markets. Bitcoin has reclaimed the $30,000 mark for the first time since May 2022.

We've plotted the performance of the major cryptocurrencies relative to Bitcoin over the past 100 days. As we can see, Bitcoin has outperformed all cryptos with the exception of Solana, which has seen a healthy rebound after the FTX collapse. 

A market update for April 11, 2023. We'll also give an update on the performance of the STRATxAI ETF strategies. Finally, we'll explore Bitcoins recent dominance over the crypto sector.

Market Review - April 11, 2023

This week's discussion is an exciting one! We're diving headfirst into the market's rebound from the October 2022 lows. Will we witness the rise of another bull market or is this just an extended bear-market rally? We'll be exploring the phenomenal opportunity of value stocks. Finally, we'll take a panoramic view of the volatile world of cryptocurrency.

Despite facing steep interest rate increases in the past 12 months, the market has remained resilient. The Federal Reserve is anticipated to start cutting rates in the coming months, conditional on OPEC's oil-production cuts not leading to another inflationary surge. We have 

 entered a bull market territory. The S&P 500's has risen 15.8% while the Nasdaq-100's has surged 22.7% from October 2022 bottom. We have graphed the performance of each index over the past year. Although the Nasdaq has shown an impressive return since October, it is still lagging behind the S&P 500's overall performance for the prior 12-months.

The Market's Recent Performance Misleading?

There is another side to this story. The market's recent positive performance has been predominantly driven by the tech giants. We've plotted the S&P 500's performance alongside the % of stocks within the index that have outperformed the index within the prior 3-months. At present, only 34% of the market has outpaced the benchmark. This indicates that a limited number of stocks have been responsible for the majority of the gains.

The S&P 500 is structured as a market cap weighted index, meaning that stocks with larger market capitalizations receive a higher allocation. In contrast, an equal-weighted index assigns an equal allocation to each stock. We have charted the performance of the S&P 500 against the equal-weight S&P 500 since 2006, revealing that the equal-weighted version has slightly outperformed during this timeframe. This can be attributed to the size factor, which suggests that smaller stocks tend to outperform larger ones. However, during periods of economic instability such as the Global Financial Crisis and the COVID-19 pandemic, the market cap weighted index has demonstrated a surge in value compared to its equal-weighted counterpart. Recently, we have witnessed another increase, which does not bode well for the broader market.

OK, we're stating the obvious here, but bear with us. Value has had a pretty impressive 12-months. The outlook is still very positive and the value-spread remains at elevated levels. We'll analyse the Price to Free Cash Flow (PFCF) factor.

The value spread is determined by calculating the average PFCF ratio of the top decile (most expensive stocks) and dividing it by the bottom decile (cheapest stocks). A high value spread indicates strong potential for value investors, while a low spread suggests the opposite. As the chart below suggests, it's a 

 good time to invest in value stocks. The current value spread is almost double the long-run average, indicating that value is primed for outperformance in the upcoming years.

Bitcoin was the most performant asset in Q1 2023. In the past week, it returned 2.9%. Ethereum, Polkadot, and Ripple all experienced promising gains also, varying from 2.9 to 12.9%. Binance Coin fell 2.7% within the week. 

If you are interested in creating a diversified portfolio with multiple asset classes, you can use our 

A market update for April 3, 2023. We'll look at the market performance through the lens of interest rates, equities, and cryptocurrency.

Market Review - April 3, 2023

This week, we're diving into The Fed's latest moves and their impact on the economy. Our analysis will give you a peek into how the stock market might react to their monetary balancing act. Plus, we've got a fascinating deep dive into the historical returns of the market in various interest rate scenarios.

The Fed are trying to mitigate the risk of a systemic banking crash while keeping an eye on inflation. Their actions over the past 4 weeks have been contradictory.

The Fed has risen interest rates to combat inflation.

They have also expanded their balance sheet to backstop the bank's bond losses. This expansion of liquidity will increase inflation. 

It's unlikely that rates will remain at these high-levels for long. The market is pricing in rate cuts by July, 

Let's address the crucial question: How does it impact the stock market? 

We analyzed the forward returns of the market under different interest rate environments. We calculated the 3-year nominal forward returns and grouped them into buckets based on the interest rate of that time. Forward returns tell us the future return of the market at a given period in history, and we can use this to set performance expectations. Our dataset starts in 2000. The chart below clearly shows a strong relationship between interest rates and future market returns. 

The current interest rate lies in the 4% -> 5% range and suggests that nominal forward returns for the S&P 500 will be negative over the next 3 years. Diversification can protect investors. We generated a simple 

 with the S&P 500 and gold. It outperforms a buy-and-hold strategy by adding diversification to an investor's portfolio.

Additionally, we can examine the relationship between stocks and interest rates. Note that since 1995, there has been a positive correlation between stocks and interest rates, indicating that they have moved in tandem. This is a surprising discovery. We we can see in the chart below, the mean correlation is not particularly strong. 

During periods of financial distress, when the Fed has cut rates to boost a struggling stock market, the correlation has peaked. We have identified two previous high-correlation periods, which were the Great Financial Crisis and the Covid-19 pandemic. The present-day correlation has just turned negative.

As the Fed continues to increase interest rates, regional banks are coming under added pressure. The reasons for this are many:

With the rise in interest rates, banks are amassing unrealized losses on their bond investments. A significant number of banks bought held-to-maturity bonds, whose worth has declined in line with the higher interest rates available today. 

Nevertheless, this circumstance alone is not fatal. It is only if depositors come looking to withdraw their cash that the bond losses have to be realised. This is exactly what has happened with many of the regional banks, who deposits have not been guaranteed by the Fed. Illiquidity and even insolvency has plagued the smaller banks.

This pain has been compounded by the fact that banks cannot offer returns comparable to short-term treasury bills, and therefore depositors have been rushing for the exits. 

The likely impact of the banking crisis is a consolidation of capital into the hands of the largest U.S. banks such as J.P. Morgan and City Bank, as investors will pour assets into the 'too big to fail' banks.

A market update for March 27, 2023. We'll look at the market performance through the lens of interest rates, equities, and cryptocurrency.

Market Review - March 27, 2023

In this week’s market review, we’ll look at the banking crisis which is currently unfolding in Europe and the USA. We’ll discuss Bitcoin’s outperformance and see how it's performed as a hedge against the bank stocks.


The potential for financial contagion remains prevalent. Credit Suisse, a significant international bank, has become the latest institution to face trouble, and was recently acquired by its domestic competitor, UBS Group, on March 20th. If Credit Suisse had collapsed, it could have caused significant strain on the global banking sector. To prevent such an outcome, the Swiss National Bank has agreed to provide $100 billion in liquidity to ensure the bank's survival.

It's important to note that Credit Suisse has been underperforming for a considerable amount of time. Its average quarterly net income over the last five years has been negative $100 million, and the company has incurred losses of nearly $10 billion in just the last two years. The company's stock price has reflected its poor performance and has dropped almost 99% since 2006, the beginning of our dataset. Credit Suisse's all-time high market capitalization was nearly $65 billion, but it was sold to UBS Group for just $3 billion. Furthermore, its assets reached a peak of $1.24 trillion in 2008, but by 2023, they had fallen by over 50% to $575 billion.

Investors have been closely watching the U.S banking sector over the past two weeks, as it has exhibited a systemic weakness. As we mentioned last week, the Federal Reserve intervened by guaranteeing deposits beyond the $250,000 maximum coverage provided by the Federal Deposit Insurance Corporation (FDIC). This move helped ease some of the market panic. 

However, comments made by U.S. Treasury Secretary Janet Yellen, at a Senate committee hearing last week, did little to instil confidence in the health of regional banks. Yellen indicated that uninsured deposits would only be guaranteed in cases where their collapse would pose a "systemic risk." She reaffirmed the "too big to fail" theory, stating that only depositors of banks whose collapse could threaten the entire banking system would be guaranteed. As a result of this uncertainty, the regional banking sector has experienced a significant decline of 8% in the past few trading sessions.

Despite the fear over the banking system, the major indices had very mixed results in the prior week. The Nasdaq-100 (QQQ) experienced nearly a 6% increase, soaring 14.7% in 2023. The S&P 500 (SPY) saw a healthy 1.44% rise while the Dow Jones Industrial Average (DIA) and the Russell-2000 (IWM) saw declines of -0.12% and 2.81% respectively. There is an 18% differential between the Nasdaq and the Dow in 2023.

QQQ's strong performance can be linked to the anticipated implementation of quantitative easing by the Federal Reserve. Recently, the Fed's balance sheet experienced a significant increase of $300 billion, effectively reversing over five months of quantitative tightening in one swift move. This newly available money is intended to assist commercial banks in offsetting their substantial bond losses, which have already caused the collapse of Silicon Valley Bank just a few days ago.

Let’s see how Bitcoin has performed under the pressure of its first banking crisis. To contrast some of the bearish news in the stock and bond markets, Bitcoin has had its best week in 5 years, putting up a 31.1% increase.

Bitcoin transactions are decentralised and peer-to-peer, they have no counterparty risk. These attributes are important during a banking crisis where contagion can spread and threaten numerous institutions simultaneously. We have charted Bitcoin’s correlation against the U.S banks on a rolling 1-month basis. Bitcoin had its lowest correlation reading in over 18 months, suggesting that it has provided some protection to investors during the recent banking crisis. Is this just another bear market rally or the beginning of a new bull market in cryptocurrency?

Smooth out the volatility and invest in Bitcoin with a long-term 

. The smart and steady way to invest in the future of money!

A market update for March 20, 2023. We'll look at the market performance through the lens of equities and cryptocurrency.

Market Review - March 20, 2023

In this market review, we'll examine one of the most significant weeks in finance since the Great Financial Crisis in 2008.

The Fed steps in to backstop US bank deposits.

You can visit the previous market review 

We are in the eye of the biggest financial storm since 2008, which reached a critical point towards the end of the previous week. Silvergate (SI), Silicon Valley Bank (SIVB), and Signature Bank (SBNY) all failed, causing widespread concern about financial contagion. By market close on Friday, SI, SIVB, and SBNY had drawdown 99%, 95%, and 80% from their respective all-time highs.

The banking crisis sparked fear within the broader market. The Russell-2000 index suffered a severe drop of -8%, while both the Dow Jones Industrial Average and the S&P 500 gave up most of their gains from 2023, experiencing a decline of approximately -4.5%. In contrast, the Nasdaq-100 experienced a smaller reversal of -3.7%. It remains in positive territory for the year.

In 2020-2021, Silicon Valley Bank purchased US Treasuries when interest rates were almost zero. The interest rates have surged to 5%, causing a significant decrease in the market value of these bonds. As a result, when depositors attempted to withdraw their funds, the bank experienced a classic bank-run. They were forced to recognize enormous losses on their bond portfolio. Silicon Valley Bank eventually failed to have sufficient cash to meet customer withdrawal demands.

The rise in interest rates is putting huge pressure on the financial system. It looks like a Fed pivot might be coming earlier than originally anticipated, given the turmoil in the banking system. The market is expecting rate cuts by the year end, with a probability of 92.8% by December 13, 2023, according to the 

In the meantime, the U.S Federal Reserve announced emergency measures to guarantee deposits of Silicon Valley Bank’s and Signature Bank’s customers. The Fed 

 that it will make up to $25Bn available to US depository institutions, essentially backstopping losses on U.S. Treasuries, agency debt, and mortgage-backed securities.

These bank failures are the biggest since the Great Financial Crisis of 2008. While none of these banks were considered “Too Big to Fail”, they were big enough to cause contagion in the markets. SIVB and SBNY were the 16th and 28th biggest banks when measured by assets. The combined assets of SIVB, SI, and SBNY is $330 billion, about 50% of Lehman Brothers in 2008.

The Fed’s intervention may have curtailed the banking sector’s distress in the short term but they are stuck with a dilemma that involves two unpleasant alternatives.

The Fed is mandated to curb inflation therefore will need to continue to raise rates.

Rates hikes will put the banks under greater pressure due to increasing losses on their bond allocations.

It seems that the sought after “soft-landing” is becoming an unlikely possibility.

History never repeats itself, but it does often rhyme.

Last week, we compared the current bear market with that of 1973 and 2008 drawdowns. We are going to expand our analysis. We've plotted the 2023 and 2008 drawdown, VIX, and risk-free rate data below. As we can see, the current bear market shares some similarities from that of 2008. During the GFC, rates were falling alongside the market. However, rates have been rising quickly in this bear market. The VIX (volatility index) spiked following the failure of Lehman Brothers and we’ve also seen a massive uptick in the VIX this past week, going from $19 to $26.

The contagion did not stop at trad-fi. Silvergate, Silicon Valley Bank, and Signature Bank all served cryptocurrency companies in the USA. Last year, the Terra-Luna UST ponzi collapsed into a stablecoin death-spiral, evaporating tens of billions worth of value on the Terra network. 

Crypto investors are acutely aware of the impact of a stablecoin depegging event. USD Coin (USDC) is digital stablecoin pegged to the USD. Each USDC is backed by one dollar or a dollar-denominated asset with equivalent value held in accounts at regulated U.S. financial institutions. They held $3.3Bn or about 8% of their reserves at Silicon Valley Bank. USDC began to depeg shortly after the news of their exposure broke. The value of 1 USDC fell as low as $0.88 before the Fed’s intervened and it rallied back to $1.

Bitcoin maximilalists have been shouting about the benefits of decentalisation and self-custodianship for years now. They have been waiting for an opportunity like the one that just presented itself, for the asset to shine. Going into the weekend, Bitcoin dropped below $20k for the first time since January. It has since rallied over 30% to ~$26,500.

There are a few reasons why Bitcoin might have risen at the weekend, including

Expectation of Fed pivot and quantitative easing and therefore investors want harder assets like Gold and BTC

Did you know that you can research, build, and trade your own strategy ideas with STRATxAI's pro tools, 

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A market update for March 14, 2023. We'll look at the current banking crisis in the USA.

Market Review - March 14, 2023

In this weeks market review, we’ll provide an overview of the current state of the financial markets. We’ll compare the current drawdown with its historical counterparts. You can visit last weeks market review 

We'll start with a look at notable performances over the past week. 

Last week saw a positive reversal of fortune for the main indices, which traded sideways in February. The Nasdaq-100 (QQQ) rose by 2.68%, while the S&P 500 (SPY), Russell 2000 (IWM), and the Dow Jones Industrial Average (DIA) all recorded gains of roughly 2%. The previous week saw a significant drawdown, with many of the main indices recording their worst week of the year. 

The Nasdaq-100 has shown remarkable strength this year, bouncing back from a 33% decline in 2022. It is worth examining how this year's performance compares against historical data. Notably, the Nasdaq-100 has achieved its third strongest start to the year since 2006. In the two instances prior to this, when the index had a better start to the year in 2012 and 2019, it increased 18% and 39%, respectively. It's a promising sign.

Shifting the tone from the previous section, it's important to note that we are still in the midst of a bear market. To gain perspective, we have examined previous drawdowns and compared them to the current one. The similarities between the current and past bear markets are noteworthy. Presently, we are 300 days into this bear market, and the returns are nearly on par with those of the Dot Com and 1973 drawdowns. The bottom came in at close to -50% on these occasions. Despite unique financial conditions in each case, the chart provides valuable information to manage expectations.

It's crucial for investors to recognize and invest in style factors, which are an important asset class. Let's examine the previous year's performance of several prominent style factors, including Value, Quality, Low Volatility, Dividend Yield, and Momentum. As illustrated in the chart below, Dividend Yield, Low-Volatility, and Value have demonstrated superior performance. In an environment of higher volatility and high interest rates, investors tend to seek safer assets or cash flows with shorter durations.

Another week of losses for cryptocurrency as it continues to display short-term weakness after a red-hot start to the year. On Friday, March 5th, Bitcoin experienced a rapid 5% drop in one hour due the fear caused by the likely collapse of yet another crypto institution, Silvergate Bank. Subsequently, Bitcoin slipped below its 50-day moving average for the first time since the beginning of the year. 

By the end of the week, Bitcoin had declined by -3.4%. Other significant cryptocurrencies, such as Ethereum (ETH) and Binance Coin (BNB), also witnessed a 3.4% fall, while Polkadot recorded a weekly return of -9.1%. The returns of the major cryptocurrencies are listed below, for various periods.

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A market update for March 07, 2023. We'll look at the market performance through the lens of equities, ETFs, and cryptocurrency.

5. Market Review - March 07, 2023

In this weeks market review, we’ll provide an overview of the current state of the financial markets. We’ll show that now is an opportune time for the style factor 

. Read down to where we ask the big question "

" and investigate the mania of meme stocks. You can visit last weeks market review 

Let's begin with a look at notable performances over the past week. 

Last week, the stock market experienced a significant wobble with the S&P 500 (SPY), Nasdaq-100 (QQQ), Russell 2000 (IWM), and the Dow Jones Industrial Average (DIA) all recording losses of nearly -3%. This was the 

. While the S&P 500, Nasdaq-100 and the small-cap Russell 2000 are still positive in 2023, they have retraced almost 50% of their January gains. The Dow has fallen into negative territory.

Every sector was negative for the week. Transportation was the best performer, suffering only half a percentage point decline. Technology Services sector posting the largest loss of over 4%.

Seasonality charts can be used to identify patterns or trends in a stocks performance during specific times of the year. We've plotted the average monthly S&P 500 return over the past 17 years. 

Historically, March has been a positive month for the S&P 500, returning 1.5% on average

. Will we see the trend continue in 2023?

Value investing has been shown to deliver strong returns over the long run, as value investors are able to identify and invest in undervalued or cheap companies that eventually outperform the market. With that being said, value has largely underperformed over the past decade and many investors have been quick to proclaim its demise, a quick Google search will yield hundreds of articles claiming as much. We have conducted an analysis on the spread of value in relation to the Price to Book (P/B) ratio. Additionally, we have charted the performance of a long/short value portfolio created by Fama-French. 

The value spread is determined by calculating the average P/B ratio of the top decile (most expensive stocks) and dividing it by the bottom decile (cheapest stocks). A high value spread indicates strong potential for value investors, while a low spread suggests the opposite. When the value spread declines, long/short value portfolios perform well. In February 2021, the value spread reached its peak and has since decreased significantly. During this period, the Fama-French value factor (High Minus Low) produced a return of over 50%. 

The spread is still very wide, at the 80th percentile, and a narrowing of this value will return even greater gains. 

A similar phenomenon can be observed with a long-only value strategy, 

 if you’d like to check out how it performed.

The meme stock craze of the past few years has been one of the most captivating phenomenons to observe. In case you happened to miss it, in 2021 and 2022, a group of individual investors on Reddit's WallStreetBets and Twitter coordinated buying certain stocks that were heavily shorted by institutional investors. The most prominent meme stocks include GameStop, AMC Entertainment, BlackBerry, Nokia, and Bed Bath & Beyond. 

we created a portfolio of the top 10 most popular meme stocks starting in January 2021

. Within a few months, the portfolio generated spectacular returns, almost quintupling by July 2021. However, it has since experienced a lengthy and 

Buying meme stocks is not a clever investment strategy. They are highly volatile and lack solid fundamentals. Many investors will not be able to stomach either the volatility or the drawdowns associated with meme stocks. A systematic approach with solid diversification is the best for any successful retail investor.

Similarly, shorting meme stocks is ill-advised, the hype and speculation can drive up prices and create short squeezes. Some sophisticated institutional investors suffered huge losses shorting meme stocks. 

Last week was another volatile week for cryptocurrencies, Bitcoin had it’s worst week of 2023, falling 5.5% after hitting a 6-month high of over $25,000 on February 21. Ethereum, Binance Coin, Polkadot, and Ripple all experienced large declines also, varying from -2.4 to -9.3%.

A market update for February 28, 2023. We'll look at the market performance through the lens of equities, ETFs, and cryptocurrency.

Market Review - February 28, 2023

A well-known phenomenon in the stock market known as "loser's reversal" typically occurs in January. This means that stocks with negative price momentum in the previous year tend to perform better in January. We put this thesis to the test in the 2022/2023 market, and the results were quite surprising. We selected the best 100 and worst 100 performers from 2022 and tracked their performance in 2023 so far. While both groups had positive returns, the "losers" from 2022 delivered an astonishing year-to-date return of +44.5% and reached a peak of +70% in January. 

We take a sharp look at the recent state of the financial markets, critically examining how inflation, the Federal Funds Rate and the returns of the S&P 500 are inter-related. Digging in and exploring the correlations of various asset classes. Cryptocurrency focus is a technical analysis of Bitcoin. You can visit last weeks market review 

Can the Fed get inflation under control without derailing the economy?The Federal Reserve has the ability to significantly impact the market by adjusting interest rates. When interest rates increase, it can lead to reduced market liquidity and higher borrowing costs for both businesses and consumers. The chart below compares interest and inflation rates with S&P drawdowns since 1965. It indicates that interest rates typically trail inflation, and that the S&P 500 has historically experienced its largest drawdowns during periods of relatively high interest rates. Notable instances where interest rates exceeded current levels include the period leading up to the 2007-2008 Financial Crisis and the Dot Com Bubble in 2000. Based purely on these two data points, it could be argued we are unlikely for the S&P 500 to hit only a 25% drawdown, as was observed in October 2022. However we need to look at today and really consider if we are in as much of a tech meltdown as the dot-com bubble and it also seems sensible to suggest we certainly are not in the leveraged environment of the GFC.

Notice the extraordinarily high inflation rate of the 1970s, the average print was 7% over the decade. Many investors are pointing to similarities between the 1970s and today. The US inflation rate for January 2023 came in at 6.4%, down slightly from 6.5% in December, but less than market forecasts of 6.2%. It’s the lowest reading since October of 2021 but still much higher than the Fed's 2% target. 

By analyzing the correlation matrix of various asset classes over the past year, we have found that among the equity-based asset classes (market, energy sector, momentum, low vol, value, quality, and yield), only the energy sector showed a limited diversification of risk from the market. On the other hand, gold exhibited almost no correlation with any other asset class. When it comes to Bitcoin, the strongest correlation was observed with the quality style factor.

The indices experience mixed returns last week, the Russell 2000 (IWM) saw a 1.5% gain while the Nasdaq-100 (QQQ), S&P 500 (SPY), and Dow Jones Industrial Average (DIA) gave up the gains made earlier in the week, to remain flat for the period.

Looking at sector performance, we can observe that the technology services sector is leading the way this year with an impressive average return of 29%. It is followed by consumer durables and health services, both of which have positive returns of around 20%. In contrast, the energy minerals and utilities sectors are lagging behind with an average return of approximately 2%.

To provide further insight into sector performance, we have graphed the percentage of stocks in each sector with positive year-to-date returns. Consumer durables sector leads with more than 60% of its stocks exhibiting positive momentum. Meanwhile, the technology services sector has fallen back to fifth place, from the previous chart, indicating that the year-to-date returns in tech are concentrated in a smaller number of stocks (e.g TSLA, META).

Last week, the Low Vol and Dividend Yield factors delivered strong performances, with positive returns of 0.6% and 0.47%, respectively. Although Value also recorded a positive return, whilst not the stand-out this week, it has been consistently outperforming this year. On the other hand, Quality experienced a negative return of 0.14%.

If you'd like to learn more about equity style factors then you can 

The previous week witnessed a surge in cryptocurrency prices, with all major currencies experiencing gains. Bitcoin and Ethereum saw a rise of 15%, while BNB and Polkadot recorded returns of 10.6% and 20.9%, respectively. Bitcoin's increase places it in the top 13 percentile of all weekly returns since late 2017, when our dataset begins. Historically, when Bitcoin has performed similarly well, it has returned an average of 2.22% in the subsequent 4 weeks.

Taking a technical analysts approach to Bitcoin, it has just completed a golden cross, which is the first time since September 2021. Could this be the start of the next bull run? There are more pronounced macro headwinds to overcome this time.

A market update for February 22, 2023. We'll look at the market performance through the lens of interest rates, equities, ETFs, and cryptocurrency.

Market Review - February 22, 2023

Frequent reviews of the financial markets covering equities, ETFs, factors, and cryptocurrency. The latest reports, research and outlook from STRATxAI.

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