Monthly Market Metrics and Trends

Market Theme: Assessing the Level of Debt-Funded CapEx

• Recent increases in corporate debt—where issuance is up more than 26% YTD—have raised concerns about the sustainability of CapEx funded by external borrowing, particularly against the backdrop of rising Treasury yields.
• We examine debt ratios for the S&P 500 and its Information Technology sub-sector. Even with accelerating CapEx, free cash flow per share is rising at a faster pace for the Information Technology sector than for the S&P 500 as a whole, with higher returns on capital as well.
• While net debt to EBITDA has been rising for the Information Technology sector, this ratio is still well below the ratio for the entire S&P 500. Moreover, a median free cash flow coverage ratio of nearly 15x points to substantial capacity to meet interest obligations from internally-generated cash flow.

Market Metrics

• S&P 500 (Price Index): August close 7,686.1, +2.6% M/M, +12.3% YTD, +19.0% Y/Y
• S&P 500 Sector Total Return Performance:
  • Best = Energy +7.0% M/M / Energy +44.2% YTD / Energy +45.8% Y/Y
  • Worst = Utilities -4.8% M/M / Consumer Discretionary no change YTD / Utilities +3.0% Y/Y
• Volatility Index (VIX): Monthly average 15.2%; -1.9 pp M/M, -0.5 pp Y/Y
• Equity Average Daily Volume (ADV): Monthly average 16.4 billion shares; -6.1 % M/M, no change Y/Y
• Options ADV: Monthly average 65.7 million contracts; -2.4 % M/M, +12.6% Y/Y

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