a little break down; from 27th April to now

Utilities  2%
Consumer Defensive   (3)%
Healthcare   (8)%
Communication Services   (11)%
Consumer Cyclical   (13)%
Real Estate   (15)%
Energy   (17)%
Basic Materials   (17)%
Industrials   (23)%
Technology   (23)%
Financial Services   (24)%

What is interesting to me is the return on technology, its very idiosyncratic given the relatively "normal" systematic returns that we see with the other sectors, ie. we expect to see utilities outperforming fin serv and cyclical industrials and base materials in an anticipation of a double dip/slowdown, I'm not sure/ well I didn't think that we would see such a dramatic fall in tech in the same scenario.

Looking at factor returns;
size  4.99%
value  15.81%
dividend  7.52%
momentum  9.42%
balance sheet   (0.43)%
"cloud"  11.62%
model  6.07%
conc. Model  6.97%

I find it even more surprising that the return on the balance sheet model has been so poor over the period. What does stand out is that the value and dividend models have performed very well over that time frame, to me that means that there has been a lot of relatively unsophisticated participation in the market before and after the sell off started.

The "cloud" factor is interesting as well, although mostly driven by the awful performance of normal tech.

I feel comfortable posting numbers like this because these factors are quite robust. Something often neglected much to the detriment of real returns in the long term.

under the hood of a sentiment change

there has been a dramatic change in sentiment over the last month and a half.

the spy is down  -7.41%, iwm -10.11%, qqq -8.51%.

tlt is up +3.50%.

gld is down -0.86%

there have been many blog lines spilt on this topic, suffice to say, this has absolutely nothing to do with the debt ceiling, nothing to do with Japan, or Libya, and probably not that much to do with Greece either.

What then is driving this repricing? digging deeper than just the headline numbers;

size +1.20%

value vs growth +8.33%

momentum +1.69%

liquidity provision strategies +0.81% (unlevered)

consistent with the market shifting to more defensive footing in anticipation of slowing growth and macro economic weakness. My narrative is this; the commodity spike over the last couple of months hurt consumers, a small disruption to supply chains from Japan have undone a lot of the monetary policy heavy lifting of the last year. Demand remains weak.

What is not being talked about enough, is the tightening of Chinese monetary policy, and the risk that we see a hard landing there, which could seriously impact the commodity economies such as Australia.