Key Insights
Three-section weekly brief from the latest LLM run. Each card cites specific numbers from the universe scoring data; the pipeline regenerates this after every grade snapshot.
The market is in a DIVERGENT regime, characterized by improving short-term quant scores across the universe but deteriorating overall quality grades, with the Q3M vs Q12M universe-wide score improving by +2.23.
Universe-wide quant scores show a positive momentum inflection, with the 3-month average score at +3.21, significantly higher than the 12-month average of +0.98, indicating a short-term improvement of +2.23. Market breadth remains healthy, with 62.0% of equities having their 30-day SMA above their 100-day SMA.
The overall quality of the universe is deteriorating, with the percentage of A+B graded names falling by 1.6 percentage points to 31.4% from 33.0% in the previous snapshot. This decline is part of a longer-term trend, with A+B grades having decreased by 19.2 percentage points over the last 11 snapshots from 50.6%.
Significant sector divergence is observed, with Energy maintaining the highest conviction at 58.1% A+B grades but showing strong deceleration with Q3M-Q12M at -6.36. Conversely, Health Care and Financials are accelerating, with Q3M-Q12M changes of +5.86 and +4.59 respectively, and A+B grades of 39.6% and 37.2%.
| Symbol | Sector | Grade | Return | Weight | Impact▼ |
|---|---|---|---|---|---|
| NVDA | Information Technology | B | +5.0% | 4.81% | +0.24% |
| MSFT | Information Technology | B | +6.6% | 3.21% | +0.21% |
| JPM | Financials | B | +16.1% | 0.84% | +0.13% |
| LLY | Health Care | A | +11.9% | 1.00% | +0.12% |
| JNJ | Health Care | B | +17.1% | 0.58% | +0.10% |
| PANW | Information Technology | B | +30.0% | 0.28% | +0.08% |
| ABBV | Health Care | B | +18.4% | 0.42% | +0.08% |
| MRK | Health Care | B | +22.7% | 0.33% | +0.07% |
| BAC | Financials | B | +18.1% | 0.39% | +0.07% |
| V | Financials | B | +11.4% | 0.61% | +0.07% |
| MA | Financials | B | +15.0% | 0.45% | +0.07% |
| AMGN | Health Care | B | +25.3% | 0.21% | +0.05% |
| RCRUY | Industrials | B | +41.4% | 0.13% | +0.05% |
| ABT | Health Care | C | +28.8% | 0.18% | +0.05% |
| TMO | Health Care | B | +24.2% | 0.21% | +0.05% |
- CANADA134
- BRITAIN66
- JAPAN64
- CHINA62
- ISRAEL35
Energy remains the highest conviction sector with 58.1% A+B graded names and an impressive average ROE of 71.7%. However, the sector is decelerating significantly, with Q3M quant score at +0.91, down from Q12M of +7.27, a -6.36 change. While CLMT (+23.2 Q3M) and VLO (+20.4 Q3M) show strong short-term acceleration, names like SUNC (+6.3 Q3M) and NGL (+0.6 Q3M) are experiencing significant deceleration in their quant scores.
Health Care and Financials are showing strong positive momentum inflections, with Health Care's Q3M-Q12M change at +5.86 and Financials at +4.59. Health Care has 39.6% A+B names, while Financials has 37.2%. RLAY in our long book is accelerating with a Q3M score of +17.3, while LENZ and SIGA in the short book have Q3M scores of -15.6 and -19.7 respectively, indicating continued weakness.
Information Technology and Real Estate are showing positive momentum shifts, with Q3M-Q12M changes of +0.58 and +1.24 respectively. Real Estate exhibits strong technical breadth at 77.9%, while IT is at 55.2%. However, our long position SNDK in IT has seen its Q3M score drop to +4.4 from +18.3, indicating deceleration.
The short book continues to identify weak names, particularly within Communication Services, where GAMB, TTD, and GOGO show Q3M scores of -12.0, -14.1, and -11.6 respectively. While the Consumer Discretionary sector shows a positive Q3M-Q12M change of +4.79, FLUT in our short book has seen its Q3M score improve to +2.5 from -14.0, suggesting potential short-term reversal.
The percentage of strong A+B graded names has deteriorated by 1.6 percentage points to 31.4% this week, continuing a significant 19.2 percentage point decline over the last 11 snapshots.
The long book exhibits high sector concentration, with 7 out of 10 names in Energy, and 5 of these 10 long positions, including SNDK and SUNC, are showing deceleration in their 3-month quant scores compared to their 12-month scores.
The Energy sector, despite having the highest conviction with 58.1% A+B names, is experiencing significant momentum deceleration, with its Q3M quant score falling by 6.36 points relative to its Q12M score.
Utilities remains the lowest conviction sector with only 11.9% A+B names and a decelerating quant score trend of -3.08, while Consumer Discretionary and Communication Services also remain low conviction at 19.3% and 24.6% A+B respectively.