Breadth Over Beta in a Low-Vol, Real-Economy Market

Synopsis

This week’s Lenses explores a market rewarding real-economy exposure and broadening leadership, supported by resilient consumption, benign inflation, and contained policy and trade risks. Suppressed volatility and unrewarded beta continue to favor Value, commodities, and selective cyclicals over momentum-heavy Growth. Until inflation or policy shocks reprice risk, returns are likely driven by breadth, factor selection, and real asset exposure rather than broad risk-on beta.

Lens 1: Surprise Metric

Our “Surprise Metric” reveals factor movements outside of their historical return distributions for different horizons (Surprise 1W, 1M, 3M columns below). Values above 1 (below -1) standard deviation suggest outsized strength (weakness) relative to history (data sourced from our open ecosystem of risk model providers).

End Date: 1/23/2026

^{* Arrows represent directional change in 1W Surprise Metric. Single arrows indicate 1X or larger difference from previous week and double arrows indicate a 2X or larger difference. Horizontal arrows indicate minimal change.}

Highlights

• Real assets and commodity-linked markets continue to lead. The Commodities Beta factor shows resilience as the metals-driven rally is rewarding exposure to physical production and real-economy assets—supporting Energy, Materials, and commodity exporters like Brazil, where strategic metals (e.g., niobium) provide structural upside.
• Value still outperforms Growth as low-beta leadership persists. Both factors had positive surprises but the rotation toward “old economy” sectors remains intact, with Healthcare, Energy, and Materials extending gains, while weak beta/vol performance argues against crowded, high-multiple Growth exposures.
• Resilient consumption dampens factor dispersion and suppresses risk premia. Reported GDP was better than expected driven by consumption, but a near-certain FOMC pause and a frozen labor market are keeping a lid on Beta, Vol, Momentum, factors suggesting more selective exposure over broad risk-on trades.

Lens 2: Thematic Crowding

This snapshot reveals thematic hedge fund exposure by measuring the beta of a Wolfe Hedge Fund Crowding factor portfolio to key market themes, calculated from residual return data. Higher beta indicates greater crowding in the theme, while lower beta suggests contrarian or avoided positioning to the theme. Data used for this analysis extends back to Jan 1st, 2024. 

How to read this graph

Highlights 

• Tariff risk eased as concrete deals replaced headline threats. The Greenland agreement suspended proposed tariffs in exchange for interim supply and investment concessions, reducing near-term escalation risk, while the EU–LatAm trade deal expands EU access to nearly all Latin American markets—redirecting trade flows away from tariff-exposed regions and favoring exporters in commodities, industrials, and agriculture.
• Inflation remains above target but non-binding for growth. The inflation theme retreated since last week as CPI prints continue to come in benign, with no evidence of re-acceleration or demand destruction. Despite inflation being above central bank targets, consumption remains resilient.
• Risk appetite is broadening beyond megacap tech. Cyclicals edging ahead of defensives, combined with strong retail dip-buying and cautious institutional positioning, points to widening market breadth—supporting selective cyclicals, mid-caps, and diversified leadership rather than narrow beta trades.

For Further Discussion

As you digest this week’s Lenses, consider further discussion on the following points:

• Does the continued outperformance of real assets, Value, and commodity-linked markets signal a durable regime shift, or is leadership still contingent on suppressed volatility and stable policy conditions?
• With inflation benign, consumption resilient, and tariff risks contained by targeted trade deals, what catalysts would be required for beta, momentum, or Growth factors to reassert leadership—and are those catalysts visible?
• As market breadth widens beyond megacap tech amid cautious institutional positioning, how should portfolios balance selective cyclical exposure against the risk of volatility re-pricing around policy or trade shocks?

Omega Point can help you surface and explore these questions with data-driven clarity. Reach out if you'd like to dig deeper into any of these themes.