V-Square Quantitative Management LLC

Hear Mamadou-Abou Sarr, CIFD and Habib Moudachirou, FRM, CIFD, NACD.DC share their vision for V-Square ! Join us in this journey! V-Square Quantitative Management LLC : This is Sustainable Investing Reimagined #vsquare https://lnkd.in/dnAs4efZ

Shows Through: The Market’s Shift to Risk-Off #chartoftheweek Over the few weeks, the S&P 500 has declined steeply from its YTD high on February 19th, with concerns around tariffs, economic growth, and historically high valuations fueling volatility. When considering the S&P 500 Index’s negative return YTD, we see significant dispersion across sectors. Growth-oriented sectors like Technology and Consumer Discretionary have borne the largest losses so far, reflecting a shift to risk-off positioning. Though we are still in Q1, the “Magnificent Seven” growth in 2025 is showing signs slowing. By contrast, defensive sectors such as Healthcare and Consumer Staples have delivered positive YTD returns. Healthcare is showing a steady demand as the long-term tailwind of an aging population and reasonable valuations may be drawing investor interest after a few years of muted performance. Meanwhile, cyclical segments, such as Energy and Industrial, have remained relatively subdued YTD. Are we in for a change in top-performing sectors or is this a short-term shift? Share your thoughts! Source: Bloomberg, S&P Global, V-Square Quantitative Management. This chart illustrates the YTD Price Return from 12/31/2024 through 3/11/2025 for the S&P 500 Index and its underlying GICS Level 1 Sector Indexes. The “Magnificent Seven” stocks, a group of high-performing U.S. stocks in 2024, includes Telsa, Nvidia, Apple, Alphabet, Amazon, Microsoft, and Meta. It is not possible to invest directly into an index. Index returns do not reflect any management fees, transaction costs or expenses. Past performance does not guarantee future performance. vsqm.com/disclaimer?u=12

Savings Spike: A New Year Shift in Consumer Behavior? #chartoftheweek The financial strength of households can be a revealing gauge of consumer spending power and overall economic health. Disposable Personal Income (DPI) is the cash individuals have left after taxes, which may go toward household spending or household saving. Looking back over the two past years, monthly growth in spending typically outpaced growth in DPI, leading to a declining savings rate in ten out of twelve months in the United States. January 2025, saw a shift: DPI recorded its highest monthly growth in the past year, while spending declined for the first time since March 2023. This increase in savings could suggest a potential move toward strengthened household balance sheets, with increasing saving given that it is likely unsustainable for spending growth to surpass income growth for a prolonged period of time. Conversely, the slowdown in household spending means less money is flowing to businesses, indicating possible economic caution or reduced consumer confidence in economic conditions. It’s too early to tell if this signals a broader shift or just a short-term bump—particularly since we saw a similar pattern in the January 2024 seasonally adjusted data. Interestingly, the current personal savings rate of 4.6% is below the ten-year average level of 6.9%. The increased DPI and savings levels are an interesting signal of household financial health, even as concerns about inflation, tariffs, geopolitical events, and interest rates continue to make the news. Are you monitoring consumer spending and saving trends? Let’s discuss!?? Source: Bloomberg, Bureau of Economic Analysis, V-Square Quantitative Management. This chart illustrates the month-over-month change in the seasonally adjusted US Disposable Personal Income and US Spending, and the US Personal Savings Rate. Data displayed is February-2024 through January-2025. vsqm.com/disclaimer?u=12

YTD Market Moves: A Shift in the Tide? #chartoftheweek Two months into 2025, we’re seeing a notable shift from last year’s strong market performance. Perhaps most striking, the Magnificent Seven’s rally appears to have lost steam, with the group posting one of the few negative returns in our snapshot. Nvidia stands out—with significant volatility YTD—after a blockbuster 2024. Concerns over chip demand, AI-driven valuations, and a more competitive semiconductor landscape than previously thought have weighed on investor sentiment. Meanwhile, Bitcoin is showing signs of beginning to cool off, posting a modest decline after a strong 2024 as sentiment normalizes. In contrast, European equities have started 2025 on a strong note?after a relatively muted 2024, as reflected in the Stoxx Europe 600?and Euro Stoxx 50?indexes. While part of this rally stems from currency dynamics—the USD strengthened against the Euro in 2024 but has weakened so far in 2025—it’s also supported by expanding P/E ratios, suggesting investors may be looking to Europe for relative value after last year’s European underperformance versus U.S. markets. On the fixed income?side, aggregate bond returns remain subdued?for both 2024 and early 2025. As we noted in our December analysis, high-yield spreads tightened to historically low levels—a key driver of total returns. However, with spreads now at extreme lows, investors may want to tread carefully in this space. What’s been your biggest surprise in YTD performance so far? Let’s discuss! ?? vsqm.com/disclaimer?u=12 Source: Bloomberg, Barclays, S&P Global, MSCI, ISS Stoxx, V-Square Quantitative Management. This table illustrates the total return percentage for various assets and indexes for 2024 and YTD 2025 (through 2/25/2025). Comparing full year 2024 to YTD 2025 will not give the full performance picture. Past performance is not a predictor of future performance.?Indexes are owned by their respective owners. It is not possible to invest directly into an index.

The Ongoing Distress in Commercial Real Estate: Persistent Challenges for the Office Sector hashtag #chartoftheweek Over the past 18 months, distress in commercial real estate has continued to climb across office, multifamily, and retail sectors—while industrial real estate has remained relatively stable. The office real estate sector stands out, with distress rates reaching 17.7% in January 2025 and vacancy rates approaching 14%, marking a significant upward shift since the onset of the COVID-19 pandemic. While media attention on office distress has faded compared to the peak concerns of 2020-2022, the vacancy rates have continued to rise. The current challenges facing office real estate—ranging from shifting work patterns to refinancing pressures—may be considered structural rather than cyclical, raising questions about long-term valuations and recovery prospects. With corporate bond spreads at historically low levels, some are turning to commercial real estate debt in search of higher yields. This strategy comes unique trade-offs ranging from liquidity constraints to sector-specific risks. As distress continues to reshape the market, disciplined underwriting and a deep understanding of structural trends will be critical for those navigating this evolving landscape. What do you think? Does commercial real estate debt have a place in your portfolio? Disclaimer: vsqm.com/disclaimer?u=12 Source: CREDiQ, Bloomberg, NAREIT, V-Square Quantitative Mangement. This chart illustrates the distress rates across the office, multi-family, retail, and industrial sectors from the period July-2023 through January-2025, as reported by CREDiQ. Vacancy rates provided by NAREIT’s Total REIT Industry Tracker Series display vacancy data for their apartment, retail, industrial, and office sector?indexes. It is not possible to invest directly into an index. Change since Q4-2019 shows the absolute change in vacancy rate for each sector, comparing December 31,2019 and September 30, 2024.

A Nation Divided on Inflation: Expectations Split Along Party Lines #chartoftheweek Following our post last week on tariffs, inflation is a natural next topic— and one that has remained top of mind for investors and consumers alike over the past several years. While inflation has cooled significantly since its post-pandemic surge, key metrics like CPI and Core CPI remain above the Fed’s long-term target. More recently, the downward trend has stalled, raising the question: Are we entering a period of persistently higher inflation? President Trump’s latest tariff proposals could add to inflationary pressures, making it even more challenging for inflation to return to target levels. When we look at inflation expectations across political parties, the divide is striking. Over the next year, Democrats expect inflation to rise to ~5%, while Republicans anticipate little to no inflation. This marks one of the largest gaps in expectations we've seen historically—reflecting a fundamental difference in economic outlook. How are you thinking about tariffs and inflation? Let’s discuss Chart Source: Bloomberg Opinion, Jonathan Levin, February 10, 2025. vsqm.com/disclaimer?u=12

New Episode Alert! #TheFutureofFinancePodcast Join host Georges Dyer in Episode 3 of #TheFutureofFinancePodcast as he sits down with Mamadou-Abou Sarr, CIFD, co-founder and president of V-Square Quantitative Management LLC. They dive into the world of quantitative investing, its connection to sustainability, and the evolving role of AI in finance. Don’t miss this insightful conversation on navigating climate risk and the trends shaping today’s investment landscape! ?? Watch now on YouTube, and don’t forget to like, comment, and subscribe! Watch here: https://lnkd.in/eax3uwqE Stream here: https://lnkd.in/eXr-MTWC #QuantInvesting #SustainableInvesting #ClimateRisk #AI #Finance #WealthTransfer

To tariff, or not to tariff, that is the question: If Adam Smith and David Ricardo could hear us… #chartoftheweek This week’s talks on tariffs—targeting China, Mexico, and Canada— are already sending far-reaching effects through the markets. With the aim of protecting U.S. industries and enhancing negotiation leverage, it seems externalities of these tariffs will likely lead to higher costs for businesses reliant on imports and rising prices for consumers. Adam Smith and David Ricardo, who set the foundation for modern philosophy on tariffs, would argue against the use of tariffs as a negotiating tool. Economically, tariffs shift the supply-demand balance by raising prices, boosting domestic production, and curbing demand. While tariffs generate government revenue and support certain industries, they also introduce inefficiencies—leading to deadweight losses that weigh on broader economic activity. Today, sectors such as basic materials might benefit from tariffs, while other sectors such as manufacturing or automotive will likely face mounting costs due to imported components. Meanwhile, technology and business services may initially appear more insulated, though prolonged disruptions could eventually impact client demand. With Core CPI at 3.2% (December 2024), additional price pressures from tariffs could complicate the interest rate outlook. History reminds us: trade exists because it’s mutually beneficial. Disruptions rarely come without consequence. The U.S. economy faces a delicate balancing act between stimulating domestic growth, protecting key industries, and fulfilling campaign promises—all while avoiding market disruption, inflationary pressure, and heightened uncertainty for consumers. Let us know what you think! How are you considering the impact of tariffs on the economy? Is your view translating to any changes in your portfolio? Source: Brian Albrecht, 'Econ 101 is wrong about tariffs', Economic Forces. This chart is an illustration of supply and demand shifts resulting from trade and tariffs in a given market. Disclaimer: vsqm.com/disclaimer?u=12

Looking at eggs ??and beef ?? inflation of the past 10 years, bread ??remains a good hedge! Over the past several years, inflation has hit household staples hard, with many groceries seeing price increases. Driven by bird flu outbreaks in 2022 and again in 2025, eggs have been volatile—up 170% over the past five years. Impacted by rising feed costs and droughts, beef prices have climbed 45% in the same period. While still seeing a notable increase, bread prices are up ‘only’ 40%, perhaps solidifying its place in the basket. Grocery prices, and commodities more broadly, have surged across the board—how are you thinking about inflation in your day-to-day life? Share your thoughts! Disclaimer: vsqm.com/disclaimer?u=12 This chart displays prices between 1/1/2015 through 12/31/2024 for beef, eggs, and bread. Sources - the U.S. Bureau of Labor Statistics and Fred, Federal Reserve Bank of St. Louis. It is not possible to invest directly in an index. Past performance does not guarantee future performance.

International Equities: Will the Tides Turn? Building on from last week’s chart Short-Term Swings, Long-Term Perspective, an area with relatively underwhelming recent returns was international equities. A potential driver? Valuations. As shown in the chart below, international equities have experienced a steady decline in relative valuations compared to U.S. large cap equities. While a sizeable part of this trend could be attributed to the larger exposure of high-quality technology companies that generally trade at a higher multiple in the U.S. large cap equity index, it could also be due to a compression in international P/E ratios alongside an expansion of U.S. large cap P/E ratios. Investment in international equities in recent years have often been followed by disappointing results, however as international equities continue to trade at a significant relative discount, this could arguably be an opportune time to increase exposure. We still believe international equities remain an essential component of a well-diversified portfolio. What’s your perspective? Are international equities worth a closer look today? Let us know your thoughts! V-Square Quantitative Management LLC #chartoftheweek #vsquare Disclaimer: vsqm.com/disclaimer?u=12 The dark blue line on this chart shows the monthly premium/discount of the P/E ratio for international equities, ACWI ex US, relative to the P/E ratio for U.S. large cap equities, S&P500, between Jan-2004 and Dec-2024 using twelve-month trailing earnings. The green shaded area represents points in time where international equities had a higher P/E ratio than U.S. large cap equities. The blue shaded area represents points in time where U.S. large cap equities had a higher P/E ratio than international equities. Light blue lines illustrate standard deviation levels for the premium/discount on international equity vs U.S.?large cap equity P/Es. Sources: Bloomberg, S&P Global, MSCI, and V-Square Quantitative Management. It is not possible to invest directly in an index. Past performance does not guarantee future performance.