The 'Broadening' IWM Trade is Running on One Engine
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IWM, the iShares Russell 2000 ETF, is +10% YTD. Impressive headline. But decompose those returns through Qi's MFERM and the picture is far less comfortable.
The entire YTD gain has been fuelled by idiosyncratic drivers. Macro is recovering from peak Iran escalation but hasn't clawed all the way back:
- May oil futures trade at $91 vs. $65 pre the Iran Conflict. Oil is the biggest IWM factor drag YTD.
- Corporate HY credit spreads at 336bps vs. 288bps tights back in late Jan. The next biggest drag.
- Rate vol & equity vol are back to levels at the start of the Iran Conflict but not at YTD lows.
- 10yr real yields remain notably above YTD lows.
Continue reading our analysis by downloading the PDF above
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