ºù«Ӱҵ Report
Following a remarkable 2023, stocks have once again surged in 2024, with the S&P 500 achieving its most impressive first-quarter performance since 2019, boasting a year-to-date return of 10.55%. This notable upswing can be attributed to encouraging economic indicators, alleviating concerns regarding a potential U.S. economic downturn. Investors have shifted their focus towards the Federal Reserve’s anticipated transition from monetary policy tightening to easing.
The Nasdaq experienced a significant uptick of 9.3% in the first quarter, propelled by a sustained rally in artificial intelligence-related stocks and optimistic remarks from Federal Reserve officials. Notably, the Magnificent Seven, comprising 29% of the S&P 500’s market value, contributed 37% to the year-to-date return. However, a new group, dubbed the Gang of Four, including Nvidia, Microsoft, Meta Platforms (formerly known as Meta), and Amazon.com, emerged, accounting for 18% of the S&P 500 and 47% of the year-to-date return.
Market breadth remained robust with 369 stocks advancing and 134 declining, showcasing a broad-based rally across sectors. Of the 11 sectors, 10 experienced gains, underscoring the market’s overall strength.
In terms of sectors, technology, consumer cyclical, and consumer defensive sectors led the market gains, each yielding total returns of approximately 8% or higher. Notably, the real estate sector was the sole sector to finish the quarter in negative territory, while the broader stock market rally exhibited resilience and breadth.
As of March 29, 2024, our flagship index – the ºù«Ӱҵ U.S. Large Cap Diversified Index (JULCD) has out-performed the Russell 1000 (Cap-Weighted) benchmark by 0.35% year-to-date and by 10.7% since its inception. Additionally, the ºù«Ӱҵ 100 (equally weighted index) has outperformed the Russell 1000 (Equally-Weighted) index by 4.47% year-to-date and by 43.46% since its inception.
ºù«Ӱҵ Capital found that three of the five stakeholders we track delivered positive performance in Q1 2024. The Communities stakeholder delivered the strongest performance over this period with a long-short spread of 5.19%, while the Customers stakeholder fared most poorly at -2.73%. Within the Workers stakeholder, outperformance was driven by the top decile whereas for Communities & Shareholders & Governance stakeholder outperformance was driven by both deciles. For the Customers stakeholder, underperformance was driven by both deciles whereas for Environment stakeholder negative contribution was driven by bottom decile.
ºù«Ӱҵ Capital’s Overall Weighted Score takes into account the 20 core Issues determined through our annual survey research – including paying a living wage, creating a diverse, inclusive workplace, and helping combat climate change – across key business stakeholders: Workers, Communities, Shareholders & Governance, Customers, and Environment. This Overall Weighted Score had a positive long-short spread of 4.9% over the period ending March 31,2024.
Workers
The Workers stakeholder measures a company across five Issues:
In Q1 2024, we saw all five issues deliver positive performance, with the Workforce Advancement Issue faring the best. Diversity Equity & Inclusion was the weakest performer amongst the Worker issues.
Shown below are the top and bottom five contributors to the top decile (D1), the top-ranked companies as measured by their Workers score, and the bottom decile (D10), the lowest-ranked companies as measured by their Workers score.
Communities
The Communities stakeholder measures a company across four Issues:
Local Job Creation was the strongest performer followed by Human Rights. All issues were positive in Q1 2024.
Shown below are the top and bottom five contributors to the top decile (D1), the best-ranked companies as measured by their Communities score, and the bottom decile (D10), the lowest-ranked companies as measured by their Communities score.
Shareholders and Governance
The Shareholders and Governance stakeholder measures a company across three Issues:
Investor Return Issue was the strongest performer in Q1 with a long-short spread of 13.77% followed by Accountability to Stakeholders issue whereas Ethical Leadership  was negative this quarter.
Shown below are the top and bottom five contributors to the top decile (D1), the best-ranked companies as measured by their Shareholders and Governance score, and the bottom decile (D10), the lowest-ranked companies as measured by their Shareholders and Governance score.
Customers
The Customers stakeholder measures a company across four Issues:
In Q1 2024, three out of 4 Customer Issues delivered negative performance. Customer Privacy was the only positive contributor in Q1. Transparent Communication was the weakest performer followed by Customer Treatment.Â
Shown below are the top and bottom five contributors to the top decile (D1), the best-ranked companies as measured by their Customers score, and the bottom decile (D10), the lowest-ranked names as measured by their Customers score.
Environment
The Environment stakeholder measures a company across four Issues:
In Q1 2024, we saw two of four Environment Issues deliver positive performance. Resource Efficiency was the top contributor followed by Climate Change in Q1. Pollution Reduction and Sustainable Materials delivered negative performance this quarter.
Shown below are the top and bottom five contributors to the top decile (D1), the best-ranked companies as measured by their Environment score, and the bottom decile (D10), the lowest-ranked companies as measured by their Environment score.
Computation Methodology
We monitor the performance of these stakeholders and Issues on a long-short basis. The long and short portfolios are selected based on the factor scores as the top and bottom deciles within the universe of companies we track in the Russell 1000. Top decile (D1) companies are those that rank highest based on the factor score, and bottom decile (D10) companies are those that rank lowest based on the factor score.
D1 Performance is computed asÂ
(Equally weighted average of returns of stocks in D1 bucket) – (Equally weighted average of returns of all stocks within the Universe)
D10 Performance is computed asÂ
(Equally weighted average of returns of stocks in D10 bucket) – (Equally weighted average of returns of all stocks within the Universe)
Spread is computed asÂ
D1 Performance – D10 Performance