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Evgeni Tcherkasski Bfbhwj4Qafo Unsplash
01.08.2022
How to measure a bear
market rally versus a genuine turn
The bottom is in, or another bear market rally? Probably the biggest question facing equity managers today.

To help answer that question, surely the very first step requires a firm understanding of what’s driven the squeeze higher thus far.

The chart below shows the attribution of Qi model value for the S&P500 over the last 2 weeks.

Over that time, macro-warranted fair value for SPX has increased 8.35%. The biggest driver of that has been credit. The tightening of credit spreads has had twice as much impact as the next beneficial factor move.
Spx Attribution
The next 3 big tailwinds have come from inflation, real rates & European bond spreads, each contributing to around a 1% gain in model fair value.

Earnings are undoubtedly part of the puzzle, but macro currently explains 81% of S&P500 price action. Rising inflation expectations, lower real rates & tighter BTP spreads are critical.

Put another way, if equity managers aren’t watching the bond market they are blind to a big reason for July’s rally.

If the Fed endorse this easing of financial conditions, then the current macro regime will remain positive for equities.

Those who fear inflation has yet to peak, may wonder if the Fed really are happy to see the 2022 tightening of financial conditions start to unwind.

Qi macro attribution identifies what’s driving US equities. Adding this transparency into your framework means you start the process of forecasting H2 2022 performance from a far stronger position.
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Quant Insight’s Macro Analytics
on Goldman Sachs Marquee
Goldman Sachs is embedding Qi’s data-science-driven
macro factor risk data into Marquee to offer risk
management capabilities that help provide clarity to your
investment analysis as you navigate your portfolio exposures,
asset by asset, through dynamic market conditions.
Goldman Sachs is embedding Qi’s data-science-driven macro factor risk data into Marquee to offer risk management capabilities that help provide clarity to your investment analysis as you navigate your portfolio exposures, asset by asset, through dynamic market conditions.