• The Institute for Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI) is a monthly indicator of U.S. economic health. The ISM series may be characterized as a leading economic series given its high correlations with corporate earnings.
• PMI for February cam in at 52.4%, as the U.S. economy continued its current expansion for the 16th consecutive month. Note: a reading over 50 indicates economic expansion; a reading under 50 indicates economic contraction.
• A strong correlation exists between the ISM Manufacturing PMI New Orders and the trend and breadth of overall equity market price movement. This chart presents the trend of the new orders series compared to the percent of Russell 3000 companies whose current price exceeds their 200 daily-moving average.
• Note the uptick in PMI New Orders preceded the move within the Russell 3000 (a measure of U.S. large-cap and small-cap companies.

Source: PIPER SANDLER, Bloomberg LP.

• The credit curve has been flat over the last several years.
• This makes longer dated corporate bonds less attractive relative to intermediate term bonds.
• Recessions are anomalies because bonds trade on recovery rate and price and less so on spread basis.
• The strategies hold a lower exposure to corporate bonds with long maturities than their benchmarks. This reduces a strategies exposure to credit risk.
• This was a tailwind last month as the relative excess return for January was the worst month since 2022.

Sources: Bloomberg

• This chart presents the various factor indexes that reflect the performance of equity “risk premia” factors (Minimum Volatility, Yield, Quality, Momentum, Value, Size, Growth) of the MSCI World ex USA Index, which exhibits a positive return of 6.0% YTD.
• Similar to the USA Index, Enhanced Value has been the best performing factor YTD. Historically, this factor has exhibited relative outperformance over the broader index, different from the USA Index in which Quality has been the predominant factor of performance.
• The Minimum Volatility Index has captured positive returns relative to the broader Index in the near-term, similar to that of the USA Index.
• Unlike that of the USA Index, within the World ex USA Index the performance of the Quality Index has been inferior to the Enhance Value, Momentum (designed to reflect the performance of an equity momentum strategy by emphasizing stocks with high price momentum, while maintaining reasonably high trading liquidity, investment capacity and moderate index turnover), and High Dividend Yield (designed to reflect the performance of higher dividend income and quality characteristics than average dividend yields that are both sustainable and persistent, omitting stocks with potentially deteriorating fundamentals that could force them to cut or reduce dividends) factors.

Source: MSCI Inc.